KPC declares force majeure due to strike
KPC declares force majeure due to strike
The Jakarta Post, Jakarta
Coal mining company PT Kaltim Prima Coal (KPC) declared force
majeure on overdue shipments to a number of its customers in
response to a worker strike that has entered its second week.
"After careful consideration, we regret that we have to
declare a force majeure to some of our customers," KPC president
Noke Kiroyan said in a press release on Tuesday that was received
by The Jakarta Post.
But the company said it remained hopeful it would be able to
reach an agreement with workers to end the strike.
KPC, which operates a coal mine in East Kalimantan, one of the
country's largest, has been forced to halt production since Aug.
29 due to a strike by employees. The striking employees are
demanding a bonus from the company's current shareholders: Anglo-
American energy company BP PLC and Anglo-Australian mining firm
Rio Tinto.
The strike began after BP and Rio Tinto, which jointly own
KPC, announced they were selling their entire stake in the
company to local mining company PT Bumi Resources for US$500
million, including $187 million worth of debt. The deal is
expected to be completed by this October.
A majority of the company's 2,700 employees are taking part in
the action, as they demand 15 percent of the proceeds of the
sale. The shareholders have agreed to pay the workers a bonus,
but they consider the amount demanded by the strikers to be
unreasonable.
The strike is causing KPC losses of $500,000 daily.
The government said earlier the strike could cost the state up
to $3 million in lost royalties if it continued for more than a
month. Under its contract, KPC has to pay 13.5 percent of the
proceeds from its output to the government.
"KPC management has continuously urged the employees to return
to work and allow the process of mediation to continue," Noke
said in the release.
Besides the strike, KPC still faces a prolonged dispute with
the local administration over the ownership of KPC's mining site
in Sangatta, East Kalimantan.
Under the coal agreement signed by KPC in 1982, the company is
obliged to sell 51 percent of its shares to Indonesian
individuals, companies or the government. The divestment was to
have taken place 10 year after the company began production,
which was in 2001, but still has not occurred.
The East Kalimantan administration has been eying shares in
the company for years, and has been adamant that it should be
given the first opportunity to buy the KPC shares.
Last year, the central government stepped in and ruled that a
20 percent stake would go to state coal mining firm PT Tambang
Batubara Bukit Asam, and the remaining 31 percent to the local
governments As part of this agreement, a 51 percent stake in the
company was valued at $820 million.
In July, Rio Tinto and BP shocked observers by announcing they
were selling the entire stake in KPC to Bumi for $500 million.
Bumi has said it will negotiate with the local government and
has promise to go ahead with the divestment process.
Meanwhile, the East Kalimantan administration is preparing a
lawsuit against Rio Tinto and BP over the sale to Bumi.
The province's legal representative said the lawsuit aims to
focus a light on possible irregularities in the sale.