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)