Government sets deadline for KPC to divest 30% of stake

Government sets deadline for KPC to divest 30% of stake

JAKARTA (JP): The government told PT Kaltim Prima Coal (KPC)
on Wednesday to complete talks on its 30 percent divestment plan
by the end of this month or face a penalty.

Minister of Mines and Energy Kuntoro Mangkusubroto said KPC
should have sold 30 percent of its equity to local investors by
Oct. 30.

"If KPC misses the deadline, we'll impose a penalty ... there
won't be any compromises," Kuntoro said after awarding 11 mining
contracts to local firms.

He said, however, the government had yet to determine exactly
what penalty it would impose on KPC.

Kuntoro did say that missing the deadline could result in the
cancellation of the company's coal mining contract.

KPC, a mining company owned by Anglo-Australian mining firm
Rio Tinto and United Kingdom-based BP-Amoco PLC, is required to
divest up to 51 percent of its stake to local investors according
to its 1982 contract.

The first-generation 1982 mining contract stipulated that KPC
was to gradually divest a 51 percent stake to local investors
beginning five years after it began commercial operations in
1992.

However, KPC secured a permit from the government in 1997 to
delay the divestment.

Kuntoro said that unlike during the regime of former president
Soeharto, the government no longer established the price of the
shares to be sold to local investors.

Nevertheless, the chief of the Directorate for Coal at the
Ministry of Mines and Energy, Soedjoko Tirtosoekotjo, said the
government and KPC viewed the value of the company's stake
differently.

KPC has valued the shares too high and this has caused
negotiations to flounder, Soedjoko said.

He also named two possible investors interested in KPC: mining
company PT Tambang Timah and the local administration of East
Kalimantan, the province in which KPC operates.

Meanwhile, Rio Tinto representative Phillip Strachan confirmed
KPC and the government were working together to establish a
realistic value for the company's stake.

However, he declined to comment on how long the process would
take or whether the company would be able to meet the divestment
deadline.

"We are working closely with the government to complete the
divestment process and that takes time," he told The Jakarta
Post.

Asked whether KPC had already lined up possible investors,
Phillip said the company was awaiting the completion of the
valuation process before looking for investors.(03)