KPC shareholders agree to 51% divestment

KPC shareholders agree to 51% divestment

JAKARTA (JP): Shareholders of coal mining company PT Kaltim
Prima Coal in East Kalimantan said on Tuesday they had agreed to
the government's request to divest 51 percent of the company's
shares to local investors this year.

Anglo-Australian mining company Rio Tinto and British-American
oil and gas company Beyond Petroleum (BP), which each own a 50
percent stake in KPC, said in a statement they wanted to end the
debate over the divestment and move forward.

"BP and Rio Tinto are both substantial long term-investors in
Indonesia. They believe that to continue the debate over the
percentage to be offered is not helpful," the statement said.

Over the past few months, the two shareholders and the
government have been deadlocked over the percentage of shares
that must be sold to local investors under a mandatory divestment
program.

According to its agreement with the government, KPC must offer
up to 51 percent of its stake to local investors. The divestment
was to take place in stages from between the fifth and 10th years
of commercial coal production, which began in 1992.

However, the Ministry of Energy and Mineral Resources approved
KPC's request to defer the beginning of the divestment for two
years to 1998, from the original schedule of 1996.

The company offered some of its shares in 1999 but no deals
were made.

Because of the two-year delay, KPC claimed it was only
required to divest 44 percent of its stake this year.

"However, despite the previous agreement, there have been
continued requests over the last six months that KPC revert to
the divestment schedule as originally set out in the Coal
Agreement and offer 51 percent of its shares in 2001," KPC said.

The company further said the 2001 divestment offer would open
as soon as it agreed with the government on the price of its 51
percent stake.

"KPC expects a significantly higher price to be set for this
year's offer," the company said without citing a comparative
figure.

In 1999, the government and KPC agreed to a 30 percent
divestment at a price of US$175 million.

The director general for geology and mineral resources, Wimpy
S. Tjetjep, said that based on the 1999 agreement, the share
value of KPC's 51 percent stake was $297 million,

But KPC said a $150 million reduction in the company's debt
and a 20 percent surge in coal prices since 1999 should increase
the value of the company's shares.

Under the existing contract, the value of the shares are based
on negotiations between KPC and the government. If these
negotiations fail to set a value, the two parties are allowed to
appoint independent appraisers to decide on an acceptable price.

Should the appraisers fail to set the price, KPC and the
government would jointly appoint a third appraiser, who must
choose between one of two prices set by the previous appraisers.

Wimpy also said KPC must offer its shares to more than one
local investor.

The East Kalimantan administration has made it known it would
like to purchase the entire 51 percent stake.

State coal mining company PT Tambang Batubara Bukit Asam has
also expressed interest in acquiring a stake in KPC.

Bukit Asam president R.A. Sunardi said his company was waiting
for KPC to submit a proposal. He also hinted that Bukit Asam
might not necessarily seek to become a majority shareholder.

Selling the entire 51 percent stake to the East Kalimantan
administration would strip much of BP and Rio Tinto's control
over KPC.

The coal mining company has an annual production capacity of
15 million tons. However, a series of strikes has cut its output.

News agency AFX-ASIA cited Indonesian Mining Association
chairman Beni N Wahju as saying that KPC again was forced to
suspend its operations last week when 60 local residents
blockaded the mine.

Beni said a letter from KPC's external affairs general
manager, Bambang Susanto, informed him that KPC's operation was
down 75 percent.

The residents demanded compensation from KPC, while the
company claimed it had already compensated residents.

It was not clear what the compensation was for and KPC
officials were unavailable for comment.(bkm)