Govt proves sale KPC shares
Fitri Wulandari, The Jakarta Post, Jakarta
The government plans to summon coal mining company Rio Tinto and energy giant BP Plc to explain the "sudden" sale of their entire stakes in Indonesia's second largest coal miner, PT Kaltim Prima Coal (KPC).
"We will summon Rio Tinto and BP to explain why they suddenly decided to sell their stakes in KPC," Laksamana Sukardi, State Minister for State Enterprises, told reporters on Tuesday.
He did not provide details on when the meeting would take place.
Anglo-Australian firm Rio Tinto and Anglo-American firm BP Plc, which owned equal stakes in KPC, said on Monday that they had agreed to sell all their shares to local coal mining company PT Bumi Resources for US$500 million.
This marks the end of the protected legal battle between the two companies and the East Kalimantan provincial administration, within whose jurisdiction the mine is located, over who will control the mining firm.
KPC operates a coal mine in Sangatta in East Kalimantan, producing some 16 million tons of steam coal annually. The coal is exported to the Asia-Pacific region, Europe and the U.S..
The decision to sell out sent shockwaves through the mining industry, which has received no new investment for the last five years due to the economic crisis and unfavorable business climate.
Djoko Darmono, the secretary-general of the Ministry of Energy and Mineral Resources, said that the divestment process involving 51 percent of KPC shares would proceed despite the change in shareholders.
"Despite the change in KPC's shareholders, the policy for the divestment of a 51 percent stake will be carried out as planned," Darmono said as quoted by Antara.
Under its 30-year contract, KPC was supposed to hand over the 51 percent stake, which is worth $453 million, by the end of 2001. But the divestment process has been tied up in knots for years due to a legal battle with the East Kalimantan provincial administration, which wants to get its hands on the stake.
Last year, the government decided that a 31 percent stake would be sold to the East Kalimantan government, and 20 percent to state-owned coal miner PT Tambang Batubara Bukit Asam.
Rio Tinto and BP stressed that their decisions were based purely on business considerations.
"It is purely a business deal. And it is by far the best one available," Anang Rizkani Noor, Rio Tinto's deputy director for external relations, told The Jakarta Post.
Satya Widya Yudha, BP Indonesia vice president for government and public affairs, was of the same opinion, saying that the company took the view that coal mining was not BP's core business.
"We want to concentrate on oil and gas. This is a good opportunity for us to release our shareholding in KPC," Satya said as quoted by detikcom.
Anang added that Bumi Resources had been selected as the company had been the only one to show serious interest in buying KPC, and had a wealth of expertise in the coal mining field.
Questioned why the price for a 100 percent stake was lower than the agreed-upon price of $889 million, Anang only said the price was "reasonable".
Early last year, the East Kalimantan provincial administration, the central government and KPC had agreed to value 100 percent of KPC's shares at $889, and $453 million for a 51 percent share.
P.L. Coutrier, the executive director of the Indonesian Mining Association (IMA), said the decision was another sign that foreign investors were pulling out of the country's mining industry.
"It is very unfortunate as it means we are going to face a huge opportunity loss from the industry," he told the Post.
The lack of legal certainty caused by, among other things, the absence of a new mining law and continuous disputes with local governments had contributed to the unfavorable situation in the mining industry.
The autonomy laws, which took affect in 2001, gave powers over the mining industry to local governments.
Coutrier added that the current situation would slowly kill the mining industry.