Govt urged to speed up KPC divestment

Kurniawan Hari, The Jakarta Post, Jakarta

The House of Representatives urged the government on Monday to complete the protracted divestment program of giant coal mining firm PT Kaltim Prima Coal (KPC) before the end of the year.

Deputy chairman of House Commission VIII for mines and energy Emir Moeis said that the government must quickly resolve any disputes as further delays would only create business uncertainty.

"The government must quickly solve problem of the divestment of KPC," Emir said after presiding over a hearing with KPC, East Kutai administration and the East Kalimantan administration.

KPC, which is equally owned by Anglo American energy giant BP and Anglo Australia Rio Tinto mining group, is obliged to divest up to 51 percent of the company to local investors. The East Kalimantan administration gets first priority as KPC's vast mining site is located in Sangatta, around 170 km north of Samarinda, the capital of East Kalimantan.

But the divestment program has been delayed several times for various reasons, with the latest being disagreement over the share price. This problem has prompted the government to extend again the divestment deadline to March 2002.

The East Kalimantan administration has filed a lawsuit at the South Jakarta Court against KPC for the delay.

KPC shareholders have offered to sell a 51 percent stake for over US$453 million, while the East Kalimantan administration -- the sole party that has bid for the shares -- has offered below $320 million.

The government has said that based on the existing mining contract of work, any dispute on the divestment price should be resolved by an independent appraisal. If after this the problem continues to be unresolved, the last option is to bring it to international arbitration panel.

Elsewhere, Emir said that the House supported the intention of East Kalimantan to buy KPC, but several legislators were suspicious over the financial source of the administration.

Commenting on the suspicion, speaker of East Kalimantan legislative body Sukardi Jarwoputra simply said that his region was wealthy enough to buy the KPC shares.

Emir confirmed that the House considered setting up a team tasked to trace the source of the regional financing.

According to its contracts of work, KPC was required to divest its shares in stages starting in 1996, four years after the company commenced operations in 1992.

As of this year, KPC shareholders should have divested a 51 percent stake to local entities, but have yet to divest a single share.

KPC produced 13.5 million metric tons of coal last year. Its coal is regarded as some of the best in the world.