Experts demand transparency over acquisition of KPC

By Mochammad N. Kurniawan

SAMARINDA, East Kalimantan (JP): Experts said on Saturday that PT Intan, which has been appointed by the East Kalimantan administration to finance the planned acquisition of coal mining giant PT Kaltim Prima Coal (KPC), must "reveal its identity" in a bid to ensure transparency.

Mining analyst Iswan Priady said that the lack of transparency over the appointment of Intan had made local people suspicious about the intentions of Intan, and doubted whether the investor would contribute prosperity to them.

"We don't know yet who PT Intan actually is. It is their (Intan's and the local government's) obligation to provide a satisfactory answer," Iswan said at a one-day seminar on the KPC divestment program.

KPC, which operates a huge coal mining site in Sangatta, East Kutai regency, is obliged to divest a 51 percent stake to the East Kalimantan government.

But there has been criticism of the lack of transparency in the appointment of Intan, which some said was a Jakarta-based investment company linked to a group of influential businessmen and former top government officials.

The weekend seminar was participated by representatives of KPC, officials of both the central and local government, businessmen, local legislators, and mining analysts.

Intan, which was supposed also to speak at the seminar, did not send any of its officials.

Iswan also criticized the East Kalimantan government for not holding an open tender when selecting an investing partner for the acquisition of the KPC shares.

He added that the administration should also first explore the possibility of bank financing, instead of appointing a private investor, to obtain a better deal.

Local government sources said that under the deal with Intan, the East Kalimantan government would be granted a 5 percent stake in KPC if Intan succeeded in purchasing a majority stake in the coal mining giant.

Iswan said that many banks would be interested in providing loans to finance the acquisition because the KPC coal mining operation had proved capable of generating a high return on investment, which, according to one estimate, could reach around 20 percent, compared with Libor (the London interbank offering rate) of 3.6 percent.

He added that KPC had also enjoyed strong profits from the coal operation, with average net profit between 1996-1998 reaching US$116 million.

"Anyone who invests there (in the coal mine) will secure a high profit margin, as has been enjoyed by KPC," Iswan said.

KPC is equally owned by Anglo-Australian Rio Tinto, and British-American oil and gas giant BP.

The divestment program of KPC has become controversial, with negotiations going on for two years. The government and KPC are currently in negotiation over the price of the company's shares.

Meanwhile, vice chairman of the East Kalimantan Chamber of Commerce and Industry Zulkifli Sahab also objected to the local government's deal with Intan.

Zulkifli said that local investors like himself were willing to provide financing for the planned acquisition.

"We (local businessmen) have the money. There is no reason not to support the acquisition," he said.

Assistant secretary of the Kutai Timur regency administration Isran Noor confirmed that the provincial administration had signed a memorandum of understanding with Intan, but said that the agreement was not final.

"Other investors still have the opportunity to become a financing partner as long as they can give us a better deal than Intan," he said. (iwa)