Government finally decides on KPC stake allocation

A'an Suryana, The Jakarta Post, Jakarta

The central government has finally decided to allow two firms belonging to the East Kalimantan provincial administration and the East Kutai regency administration to buy 31 percent of coal producer PT Kaltim Prima Coal (PT KPC).

Another 20 percent of the shares will be awarded to state- owned coal mining company PT Tambang Batubara Bukit Asam, according to Mahendra Siregar, spokesman for the office of the coordinating minister for economic affairs, told The Jakarta Post Thursday.

The government made the decision Thursday during a limited Cabinet meeting presided over by Coordinating Minister for Economic Affairs Dorodjatun Kuntjoro-Jakti, based on the recommendation by the due diligence team formed by the government in July to handle the KPC divestment.

The due diligence team was formed following the lingering dispute between the province, the regency and KPC's shareholders over the divestment.

Under its contract, KPC was required to sell up to 51 percent of its shares either to the government, state-owned companies, Indonesian-controlled private companies or individual Indonesians in 1999. But, the province and the regency sought to buy the entire 51 percent stake, which KPC continued to resist. KPC is equally owned by Anglo-Australian mining giant Rio Tinto and London-based energy giant BP PLC.

The government then decided several months ago to keep a 20 percent stake, and allow the province and the regency to buy the remaining 31 percent.

The government then offered its 20 percent stake to state- owned companies.

Some state-owned companies have been eager to buy the 20 percent stake including mining company PT Aneka Tambang and electricity company PT PLN.

However, the due diligence team finally chose PT Tambang Batubara Bukit Asam on the grounds that it had the best reputation in the coal mining business.

"The decision is purely based on the fact that PT Bukit Asam's core business is coal mining," Mahendra said.

The 31 percent stake will be equally shared by East Kalimantan's Melati Bhakti Satya and East Kutai's Perusahaan Daerah Pertambangan dan Energi Kutai Timur.

"The two enterprises were proposed both by East Kalimantan provincial administration and East Kutai regency government," said Mahendra.

According a statement from the coordinating ministry, the government would assist the three firms in dealing with KPC regarding the negotiation price of the shares.

The government pledged not to interfere in negotiations, and the price would depend on the future deals between PT KPC and the three different enterprises, the statement said.

The government and KPC have agreed that the 51 percent stake was currently valued at US$419 million.

The statement said that after the decision, the three enterprises should first sign acceptance letters and pay for the shares within three months after the decision.

KPC spokeswoman Nunik Maulana told the Post that her company had no problem with the government's decision.

"KPC respects the decision," she said.

No officials from the East Kalimantan provincial administration or the East Kutai regency government were available for comment on Thursday.

The two regional governments struggled for years to acquire the 51 percent stake, a they were reportedly disappointed by the government's decision for them split the 31 percent stake.

They demonstrated their disappointment by rejecting the government's offer to participate in the due diligence team for the KPC divestment.