Govt urges quick end to KPC legal dispute

Govt urges quick end to KPC legal dispute

The Jakarta Post, Jakarta

The government urged owners of coal mining company
PT Kaltim Prima Coal (KPC) and the East Kalimantan province to
drop their legal dispute on Tuesday, to end the latest snag
blocking the sale of a US$400 million stake in KPC.

Spokesman at the Ministry of Energy and Mineral Resources, Nur
Winakun said on Tuesday the government might intervene to speed
up talks to end the dispute, which he called superfluous.

"It cannot drag on like this ... in the end everyone will lose
out," Nur told The Jakarta Post.

He said his office was considering ways to find a solution to
the dispute, which centers around a lawsuit the East Kalimantan
administration filed against the owners of KPC.

The coal mining company is owned by the Anglo-Australian
mining company Rio Tinto and British-American oil and gas company
BP. Both control a 50 percent stake in the company.

The two plan to sell a 51 percent stake in KPC for around $419
million, as their mining contract requires them to gradually
divest their stake to a local investor.

But last week the South Jakarta District Court took over the
51 percent shares in KPC upon the request of the East Kalimantan
government, which filed a lawsuit against KPC last year.

The province has been eying a stake in KPC for over two years,
and now alleges KPC's owners had deliberately stalled the
divestment process, blocking it from earnings it should have
received if KPC had been sold to it earlier.

East Kalimantan claimed the 51 percent stake should have been
sold in the first quarter of last year.

East Kalimantan Governor Suwarna A.F. said he initially agreed
to drop the lawsuit, but changed his mind after KPC failed to
make good on its promise to send the province a written offer for
the stake.

Suwarna said he would revoke the lawsuit only after KPC made a
formal offer to sell the 51 percent stake to his province.

But KPC demanded the lawsuit be dropped first before offering
the stake to East Kalimantan, or to any other party.

A spokeswoman at Rio Tinto said that by contract, KPC owners
were not obliged to sell the stakes to the East Kalimantan
Administration.

Nur said it was paramount to honor KPC's contract, however,
without neglecting demands from East Kalimantan where KPC was
operating.

According to him, the latest delay in the KPC sale stems from
a misunderstanding that should be promptly resolved.

He said the government would soon announce what actions needed
to be taken to resolve the disagreement.

But it remains to be seen whether the government can play the
role of mediator, as it is also a target of the province's legal
actions.

East Kalimantan filed a complaint against the Ministry of
Energy and Mineral Resources, over suspicion of corruption
tainting KPC's divestment.

The government expects to finalize the sale of KPC's 51
percent stake by the end this month.