Govt, KPC reach agreement on share prices

Govt, KPC reach agreement on share prices

JAKARTA (JP): After months of negotiation, the Ministry of
Mines and Energy has reached an agreement with the country's
largest coal mining company, PT Kaltim Prima Coal, on the most
crucial issue of the company's divestment program: the price of
shares.

Philip D Strachan, the finance general manager of Anglo-
Australian mining company Rio Tinto, which owns KPC in equal
partnership with British Petroleum, said both parties agreed last
week to value the 30 percent shares to be divested by KPC this
year at US$175 million.

"The agreement was reached one week after the Oct. 31 deadline
set by the government," Strachan was quoted by Antara as saying.

Under the contract of work (COW) awarded by the government,
KPC is obliged to sell 30 percent of its shares to the Indonesian
government, companies and citizens this year.

The company, which operates a huge coal mine in Sangatta, East
Kalimantan, currently produces 15 million tons of coal.

Publicly listed tin mining company PT Timah was interested in
buying shares but it canceled the acquisition plan early this
year, citing the price of $200 million set by KPC's valuer
Jardine Flemming as too expensive.

Timah valued the shares at $100 million.

Aside from Timah, the East Kalimantan provincial
administration was also interested in buying some of the shares.

The Ministry of Mines and Energy then stepped in to help
determine the price of the shares, hiring valuer Bahana Sekuritas
to negotiate with Jardine Flemming.

The negotiation was on the brink of a deadlock several weeks
ago due to KPC's refusal to reduce the price.

Former mines and energy minister Kuntoro Mangkusubroto then
set Oct. 31 as a deadline for the company to divest its shares,
either through private placement or public offering on the
Jakarta Stock Exchange. Otherwise, the government would impose
penalties on it or revoke its contract.

Strachan refused to explain why KPC finally agreed to lower
the price of its shares.

"The right to divulge the reasons lies with KPC's
shareholders. What is clear is that the agreement is the best
solution for both parties," Strachan said.

Strachan said KPC was now prepared to list all Indonesian
citizens, governmental institutions and companies which were
interested in buying the shares through private placement.

He said the company would announce the list of interested
buyers. Buyers should make payments in cash within three months
of the announcement, he said.

Close

Meanwhile, KPC general manager of external relations Bambang
Susanto confirmed with The Jakarta Post that KPC decided to
"close" its Jakarta office in anticipation of the implementation
of the autonomy law in 2001.

Under the new law, which awards the provincial administration
the right to manage all their natural resources, mining companies
will mostly deal with local administrations in their operations.

Bambang said KPC's management decided to shed most of its 14
workers in Jakarta and maintain three who would handle government
relations in the transition period prior to the implementation of
the autonomy law.

"The three workers will be placed at Rio Tinto's office," he
said.

Bambang said the laid-off workers sent a letter to the
company's management in Sangatta to protest the decision. (jsk)