KPC required to divest 30% stake to local partners

KPC required to divest 30% stake to local partners

JAKARTA (JP): The country's largest coal mining company PT
Kaltim Prima Coal (KPC) is required to divest more shares to
local partners this year for failing to fulfill its initial
divestment program.

KPC's finance general manager of the Indonesian unit of Anglo-
Australian mining company, Phillip D Strachan, said on Thursday
the shares, which must be sold to local partners, had increased
to 30 percent from 23 percent.

"Under the coal agreement ... we have to offer (30 percent of)
shares to the Indonesian government, or Indonesian parties or
Indonesian-controlled companies (this year)," Strachan said on
the sidelines of a ceremony to mark the opening of Rio Tinto's
new office in Jakarta.

KPC, equally owned by British companies British Petroleum and
Rio Tinto, is operating a rich coal mine in Sangatta, East
Kalimantan.

Between the fifth and 10th year of commercial production, the
company is required to divest up to 51 percent of its shares
either to the government, the Indonesian people or companies
controlled by Indonesians. The company commenced commercial
production in 1992.

Strachan said KPC was holding discussions with the director
general of mining at the Ministry of Mines and Energy regarding
the delivery of the new divestment program and valuation of the
shares.

He said he hoped sales of KPC's 30 percent stake could be
realized this year.

Strachan refused to reveal the share price or the timetable
for the share offer.

Last year KPC offered 23 percent of its shares to three state
mining companies -- publicly listed tin company PT Timah,
publicly listed general mining company PT Aneka Tambang and coal
mining company PT Bukit Asam -- to fulfill its obligatory
divestment program.

Timah was the only company that displayed an interest in the
offer, but no transaction occurred as the share price was
disputed.

Based on a valuation conducted by Jardine Flemming Nusantara,
KPC valued the 23 percent share at US$176 million,

Several analysts believed KPC was not serious in fulfilling
its obligation to divest the shares in view of the high price it
set.

Strachan denied the allegation, saying "We are very serious
(about the divestment). It is an obligation we have in the coal
agreement. And we are very conscious that we have to comply with
the obligation".

He said under the existing contract, if no parties were
interested in or capable of buying the 30 percent share offer
this year, KPC was obliged to further increase the share
divestment to 37 percent next year.

According to Strachan, the company's contract stipulates that
KPC has the right to select the Indonesian companies or parties
to which it offers its shares. KPC was yet to make a choice, he
said.

Strachan said that given the bearish condition in the local
capital market, KPC at present ruled out the option of selling
its shares through the Jakarta Stock Exchange.

KPC signed a contract with the government in 1982 and started
production in 1992. To date it has invested $750 million.

With an output of about 15 million tons this year, the company
is the country's largest coal mining venture,

Company data reveals product export destinations and demand
as: Japan (32 percent), Taiwan (24 percent), Hongkong (12
percent), Europe (12 percent), America (7 percent) and other
Asian countries, including the Philippines, (4 percent). (jsk)