Energy ministry OKs KPC divestment
Leony Aurora, The Jakarta Post, Jakarta
The Ministry of Energy and Mineral Resources has approved the plan of the country's largest coal producer PT Bumi Resources to divest its stake in subsidiary PT Kaltim Prima Coal (KPC), a government official says.
The recommendation letter was issued last Friday, Director General of Geology and Mineral Resources Simon Sembiring said on Wednesday.
"I approved the (planned) change in the shareholders' composition," said Simon.
"After this, they'll go to BKPM," he added, referring to the Investment Coordinating Board, which would then approve the share transfer officially.
Simon said that his office had studied whether the divestment process was in line with the contract, which required that the stake be bought by local investors and that the price not exceed the ceiling set by the government.
KPC's estimated value has been pegged at US$1.4 billion, meaning that the ceiling for the 32.4 stake sale stands at $454 million.
Simon reiterated that the team did not probe the appointed winner's financial strength, despite suggestions that it might not be able to afford such an acquisition.
Little-known mining service company PT Sitrade Nusaglobus has been announced as the buyer of the stake.
Sitrade's president director Herman Afif Kusumo said that the company would pay slightly less than $400 million for the stake.
"We will fund it with equity financing, which is quite easy to get nowadays, especially with the current high demand for coal," Herman told The Jakarta Post.
Global investment firms Morgan Stanley and Lehman Brothers are interested in participating, he said. "We are still weighing which one to choose," he added.
Two years ago, Bumi bought the entire stake in KPC owned by Anglo-American energy giant BP Plc. and Anglo-Australian mining conglomerate Rio Tinto for $500 million, including assumed debt, despite the government's estimated value of $822 million at the time.
KPC's contract, signed in 1982, stipulates that 51 percent of the company's shares have to be divested to local investors -- be it to the central government, local administrations, individual citizens or national companies.
In 2004, East Kutai regency administration acquired 18.6 percent of KPC from Bumi, leaving the stake to be sold at 32.4 percent.
KPC is the second largest coal producer in Indonesia, operating huge mines in East Kalimantan. The company produced 21.4 million tons of coal, of which more than 90 percent is exported, last year.
Coal prices have been rising in the past year amid growing global demand. The price of coal sold by the company went up to an average of $35 a ton in 2004 from $25.5 a ton the previous year.