Tue, 09 Nov 1999

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.


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)