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)