Firms affected by KPC dispute to lodge court objection

Firms affected by KPC dispute to lodge court objection

Moch. N. Kurniawan
The Jakarta Post
Jakarta

Companies whose assets have been seized by the South Jakarta
District Court because of their links to the owners of coal-
mining giant PT Kaltim Prima Coal (KPC) will lodge a third-party
objection, according to a lawyer.

Lawyer Fredrik Pinakunary of the Mulya Lubis and Maulana law
firm said on Thursday that the assets did not belong to KPC, but
rather to separate entities.

"We'll ask the court to release the assets because the verdict
is wrong," he told The Jakarta Post.

The court last month issued a ruling sequestering KPC assets
following a US$776 million lawsuit filed last year by the East
Kalimantan administration against KPC over a delay in the
divestment of company shares.

KPC, which is equally owned by Anglo-Australian Rio Tinto
mining group and British-American energy giant BP Plc., operates
a vast coal mine in the Sangatta area of East Kalimantan's East
Kutai regency.

The company was supposed to have divested a 51 percent stake
to local buyers last year, but this was delayed for various
reasons, including disagreement over the price of the shares.

The East Kalimantan administration, which claims to be the
preferred bidder for the KPC stake, accused the company of
deliberately delaying the divestment obligation.

Among of the assets put under the court's control are working
interests in the Tangguh liquefied natural gas project in Papua
province which are owned by BP Muturi, BP Berau and BP Wiriagar;
shares of Kelian Pty in an East Kalimantan-based gold mining
operation; and the assets of the state-owned oil and gas firm
Pertamina in the Arcadia Tower office building in South Jakarta.

Construction of the Tangguh project is estimated to cost $1.5
billion. BP and Pertamina are expecting to win a contract from
China for the supply of 3 million tons of LNG annually starting
in 2005.

Fredrik, who has been appointed to represent the affected
companies, said the court's ruling had not caused difficulties
for his clients in running their businesses.

Separately, ministry of energy and mineral resources spokesman
Nurwinakun said the government would undertake a special study
into ways of settling the KPC share divestment problem.

The team would comprise officials from the political and
security, economic, finance, and mines and energy ministries, the
police, and the Attorney General's Office, he said.

"The government team is being set up because the KPC share
divestment process has taken an unexpected (serious) twist. It
may disrupt security and order, (and the) investment climate. It
may disturb relations between states also," he was quoted by
Reuters as saying.

KPC missed a March-31 deadline to complete the divestment
program due to the East Kalimantan lawsuit.

East Kalimantan has declined to drop the lawsuit until KPC
agrees to sell the entire 51 percent stake to the local
government.

But KPC insists that according to its existing contract of
work with the central government, it has no obligation to sell
the entire stake to the provincial administration. KPC intends to
invite bids for the shares.

The government and KPC's owners recently agreed to extend the
deadline until June 30. They also agreed to maintain 100 percent
of the value of KPC shares at $822 million.

But there has been concern that the further delay could prompt
angry East Kalimantan people to blockade KPC's operations.

KPC, which has annual output of 17 million tons, exports a
significant portion of its coal production.

The mining company had in the past numerous disputes with its
labors which led to several blockades of its operation and
suspension of its coal exports.