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.