KPC shareholders deny agreeing to 51% divestment

JAKARTA (JP): Shareholders of coal mining company PT Kaltim Prima Coal (KPC) in East Kalimantan said on Monday that they were still in disagreement with the government over the percentage of shares they must divest to local investors this year.

KPC shareholders Anglo-Australian mining company Rio Tinto and British-American oil and gas company Beyond Petroleum (BP) argued they must only divest 44 percent instead of 51 percent of their stake in KPC, according to a KPC executive representing the two shareholders.

KPC director Lex Graeffe disputed the article on Saturday by The Jakarta Post, which quoted a senior government official as saying that during a meeting last week, KPC's shareholders and the government had agreed on a 51 percent divestment.

"We discussed a number of things, but we have not yet agreed," Graeffe told the Post.

Secretary-general of the Ministry of Energy and Mineral Resources Djoko Darmono said on Friday that KPC shareholders had agreed to divest 51 percent of their shares.

Rio Tinto and BP each own a 50 percent stake in KPC.

Under its coal agreement, KPC must offer up to 51 percent of its stake to local investors in stages, starting between the fifth and 10th year of commercial production which began in 1992.

Offering of shares should have begun in 1996, but according to Graeffe, KPC had secured a deal with the government to delay the divestment process by two years.

He cited that restructuring within the Ministry of Energy and Mineral Resources prompted KPC to appeal for a delay, until it was clear with whom the company must deal during the divestment process.

In 1996 and 1997, KPC made three appeals for a total of two years, that was approved by the then director general of general mining, he said.

But he said the government now insisted that the director general had no authority to sign the deal at that time.

This contradicts the government's stance in 1999, when it agreed for a divestment portion of only 30 percent.

KPC, Graeffe said, would seek clarification on that issue.

He also refuted the official's statement that the government would hand over the appraisal of KPC's shares value to the company and its bidders.

KPC's coal agreement, he said, required the company and the government to negotiate the value of KPC shares.

Should negotiations fail, he went on, both parties would each appoint an independent valuer to determine the share prices.

If still no decision was taken, the government and shareholders must jointly appoint a third valuer, he said.

"That valuer reviews the work of the other valuers and comes to a conclusion about who is correct," he said, adding:" No appeal, no renegotiation, that is the end of the process."

He said any future buyer of KPC's shares must accept the price, and pay in cash within three months of the purchase agreement.

As yet, KPC's only bidder is the East Kalimantan local administration.

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