KPC proposes neutral body to value its stake

JAKARTA (JP): Coal mining company PT Kaltim Prima Coal (KPC) has urged the government to establish an independent appraiser to value its assets and end the prolonged row over its divestment program, according to one of its owners, Anglo-Australian mining giant Rio Tinto.

Rio Tinto Indonesia's president Noke Kiroyan said on Tuesday the move was the only way to resolve the dispute between KPC, the central government and the East Kalimantan provincial administration, because each party had not agreed on the value of a 51 percent stake the company is required to sell.

"We're supposed to establish the independent appraiser now because all parties are sticking to their prices," Noke told The Jakarta Post.

However, he was not convinced that all parties would reach agreement on the price of the shareholding this year if the independent appraiser was appointed.

According to the contract of work (COW) with the government, KPC, which operates a huge coal mine in Sangatta, East Kalimantan, must offer up to 51 percent of its stake to local investors. The divestment was to take place in stages between the fifth and tenth years of commercial coal production, which began in 1992.

The company has offered some of its shares over the past few years but no deals were finalized.

KPC's shareholders have agreed to sell 51 percent of its stake to local investors this year.

The East Kalimantan provincial administration is the only party who has bid for the stake.

KPC has set the price for the holding at US$448.8 million, while the central government valued it at $309.937 million and the East Kalimantan provincial administration was only willing to pay $319 million.

The three parties have held several meetings, including one in East Kalimantan on Monday, to talk about the price but no agreement has been reached.

Noke said that an independent appraiser would value KPC's stake based on several factors including coal prices and its coal reserves.

But, he said, KPC had yet to receive a green light from the central government for the formation of the joint independent appraiser.

The provincial administration has reportedly objected to the establishment of the joint independent valuer, dismissing it as a tactic of KPC to delay its divestment program.

Some East Kalimantan provincial councillors have asked the government to terminate KPC's mining contract.

Noke insisted that under the COW, KPC should not have to deal with the local government over the price of the stake.

"According to the COW, we should only negotiate with the central government over the stake price," he said.

He said that all parties should respect KPC's COW because every action to break the COW would damage the country's reputation among foreign investors.

KPC is jointly owned by Anglo-Australian mining company Rio Tinto and British-American oil and gas company Beyond Petroleum (BP).(05)