KPC told to speed up sale of shares

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.