KPC divestment program extended until end-June

KPC divestment program extended until end-June

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The central government and East Kalimantan-based coal mining
giant Kaltim Prima Coal (KPC) have agreed to extend by three
months to June 30 a deadline for KPC's shareholders to sell a 51
percent stake in the business.

Ministry of Energy and Mineral Resources secretary general
Djoko Damono said on Thursday that the move was unavoidable
because the East Kalimantan provincial administration had
declined to drop its lawsuit against KPC and its shareholders.

"There's no other way but to extend the sale process, while at
the same time, we'll continue to persuade East Kalimantan to drop
its lawsuit."

Jakarta and KPC, however, agreed to maintain the value of 100
percent of KPC shares at US$822 million.

KPC, which operates a vast coal mining site in Sangatta, East
Kalimantan, is equally owned by Anglo-Australia mining group Rio
Tinto and Anglo-American energy group BP Plc.

According to its contract of work with the government, KPC is
obliged to divest up to 51 percent of its business to the
government or local investors. The divestment program was
supposed to be completed last year, but was delayed partly due to
differences over the value of the stake.

The delay has prompted the East Kalimantan administration,
which has insisted it becomes the preferred bidder, to file a
lawsuit with the South Jakarta District Court demanding KPC pay
compensation.

Two weeks ago, Jakarta and KPC reached agreement over the
price, a deal seen as paving the way for the stalled-divestment
process.

But the East Kalimantan administration has so-far declined to
cancel the lawsuit on the grounds that KPC is also offering the
shares to other bidders.

But KPC, referring to its contract of work with Jakarta, has
refused to bow to East Kalimantan's demand.

KPC plans to hold an open tender instead of giving priority to
East Kalimantan.

There are now several private investors who reportedly have an
interest in buying the KPC stake.