Govt won't seek to solve KPC dispute through arbitration

Govt won't seek to solve KPC dispute through arbitration

The Jakarta Post, Jakarta

The government will not go to international arbitration to
resolve the protracted dispute over the divestment of a 51
percent stake in coal mining company PT Kaltim Prima Coal (KPC)
as it sees little chance of winning the case, a senior official
from the Ministry of Energy and Mineral Resources said on Friday.

As such, the government would rather resolve the dispute over
the stake's price by appointing an independent agency, which
approach had also been agreed upon by KPC, to appraise the value
the stake, Djoko Darmono, the ministry's secretary-general, told
reporters.

Djoko did not name the independent appraiser in question but
he said the government would pay the agency US$500,000 for its
services.

"The government would rather spend $500,000 on the payment of
an independent valuer than go to international arbitration,"
Djoko was quoted by Antara as saying.

He said the arbitration process was too long and the
Indonesian government had never won any dispute in an arbitration
forum.

KPC, which operates a huge coal mine in Sangatta, East
Kalimantan, is equally owned by Anglo-Australian mining firm Rio
Tinto and Anglo-American energy firm BP PLC.

Under the contract signed with the government in the 1980s, it
is obligated to divest up to a 51 percent stake to the Indonesian
government or companies owned by Indonesians after ten years of
operation.

Despite two years of negotiations, no agreement has been
reached over the price. The company values its 51 percent stake
at $453 million, while the government has set the price at $320
million.

The East Kalimantan provincial administration, which is also
interested in the 51 percent stake and has named a lower price,
has filed a suit against the coal company with the South Jakarta
District Court on charges of intentionally delaying the
divestment.