KPC told to speed up sale of shares

The Jakarta Post, Jakarta

East Kalimantan-based coal mining giant PT Kaltim Prima Coal (KPC) is required to start offering a 32.4 percent stake to local investors this month, a government official has said.

Mahyudin Lubis, director of coal and mineral mining at the Directorate General of Geology and Mineral Resources, said on Monday that the divestment schedule was based on a contract signed with the government.

"Based on an agreement with the government, KPC should start the divestment of 32.4 percent of its shares this April, but they haven't done it yet," Mahyudin said.

He added the company had yet to estimate the value of a 100 percent stake in KPC, which would become the price basis for divestment of its shares.

Sale of the 32.4 percent stake could be realized only if both the government and the company agreed on the value of the shares.

KPC, which operates a huge coal mine in Sangatta, East Kalimantan, has an obligation to divest up to 51 percent of its shares to local investors. However, the divestment process has been stalled for years for a variety of reasons, which prompted the company's former owners, Anglo-Australian mining giant Rio Tinto and Anglo-American energy giant BP Plc, to sell their full ownership in KPC to local mining firm PT Bumi Resources in the middle of 2003.

Bumi sold late last year an 18.6 percent stake in KPC to the East Kutai regency administration, which means that it must sell another 32.4 percent stake to fulfill its contractual obligation.

BP and Rio Tinto previously agreed with the government to value 100 percent of KPC shares at US$822 million, but sold the entire KPC stake plus assumed debt to Bumi for $500 million.

M. Peter Tabalujan, Bumi's head of investor relations, said the divestment process was still ongoing.

The company, Peter said, was in the process of selecting an independent consultant to reassess KPC's share value.

"We are currently in discussion with three consultants: Hopefully, we shall select one within a month," Peter told The Jakarta Post.

Consulting company Salomon Smith Barney (SSB) was the previous consultant hired by the former owners of KPC.

The second-largest coal producer in the country, KPC produces some 18 million tons of coal per annum. It exports about 93 percent of its coal to European and Asian countries.