KPC, E. Kalimantan still in dispute over divestment

JAKARTA (JP): Shareholders of coal mining company PT Kaltim Prima Coal and the local government of East Kalimantan are still in dispute over the percentage of shares KPC must divest to local investors this year, according to a senior government official on Friday.

Secretary-general at the Ministry of Energy and Mineral Resources Djoko Darmono said KPC's shareholders and the East Kalimantan government, which planned to buy KPC's shares, failed to reach an agreement during a meeting on Thursday.

"They couldn't agree on how much of its stake KPC should divest this year," Djoko told reporters at his office.

KPC is jointly owned by Anglo-Australian mining company Rio Tinto and British-American oil and gas company Beyond Petroleum (BP)

According to KPC's shareholders, Djoko had said that the company would only need to divest 44 percent of its shares to local investors this year.

But the East Kalimantan government argued that the company should divest up to 51 percent of its shares.

Under KPC's contract of work (CoW), KPC must gradually divest up to 51 percent of its shares between the fifth and the 10th year of its commercial production, which started in 1992.

The company must sell its shares to either individual local investors, the government, or Indonesian state-owned or private enterprises.

So far, the East Kalimantan government remains the sole bidder for KPC's stake, after state-owned tin company PT Tambang Timah withdrew its bid in 1999 as it found KPC's shares too expensive.

In 1999, the government valued a 30 percent stake in KPC at about US$175 million.

"After we've decided on the percentage of shares to be divested, we can discuss their value," Djoko explained.

Djoko said that KPC and the East Kalimantan government would appoint an independent lawyer to settle the dispute.

"It will be up to the lawyer to evaluate how much of its shares KPC must divest this year," Djoko said.

He said the disagreement between KPC and the East Kalimantan government concerned legal issues, which called for a lawyer's expertise.

"Each party's lawyers had made different evaluations of KPC's divestment terms, so they agreed to appoint an independent lawyer," he said.

Djoko added that the East Kalimantan government's bid to own KPC's stake must, however, be approved by the central government.

The East Kalimantan's government, he said, had yet to disclose its funding source for acquiring KPC's stake.

He noted that the East Kalimantan government could seek funds from third parties, but cautioned that their sources should be Indonesians.

According to him, his office would be blamed if problems arise in the future because of questionable funding sources of the East Kalimantan government.

"It must be made clear who is financing them and the conditions attached to it," he said.

Last year his office had planned to form a team to evaluate the East Kalimantan's government's funding sources, and the local government's ability to manage the mining firm.

Djoko had then expressed concerns that without a clear vision, KPC could become a nest of corruption, collusion and nepotism.

He said the central government would evaluate the local government's proposal after it was clear how much of KPC's stake they could buy this year.

Officials from Rio Tinto and BP were unavailable for comments.(bkm)