Legal snag threatens KPC divestment
Debbie A. Lubis, The Jakarta Post, Jakarta
An agreement for the sale of a majority stake in coal mining company PT Kaltim Prima Coal (KPC) to the province of East Kalimantan has hit a snag, as both buyer and seller remain at loggerheads over how to drop a lawsuit filed against the KPC owners.
The dispute effectively holds off a US$419 million deal, and marks the latest in a series of spates between KPC's owners and the East Kalimantan province, which has been trying to buy the coal mining company for the past two years.
East Kalimantan Governor Suwarna A.F. said he would proceed with the lawsuit filed against KPC's two owners, the Anglo- Australian mining company Rio Tinto, and the British-American oil and gas company BP.
The two foreign companies each own a 50 percent stake in KPC.
"We will drop the lawsuit if KPC signs the March 11 Minutes of Settlement, and an agreement to offer the 51 percent of KPC shares to the province," Suwarna A.F. said.
The lawsuit was filed last year at the South Jakarta court after East Kalimantan accused KPC owners of deliberately impeding the sale process, cutting it off from earnings it should have received had KPC been sold to the province.
In the province's estimate, KPC should have completed the divestment in the first quarter last year.
Under KPC's contract of work (CoW), KPC must gradually divest the 51 percent of its shares between the fifth and the 10th year of its commercial production, which began in 1992.
Last week KPC and the central government agreed to value its 100 percent stake at $822 million, paving the way for the shares to be offered to local parties.
But three days later, the court ordered KPC's 51 percent stake to be put under its control, effectively blocking any sale.
Suwarna said he had agreed to drop the lawsuit against KPC, on the latter's promise to send the province a written offer for the stake.
The governor then ordered the cancellation of the lawsuit, but retracted the move after no offer was made.
"We have been betrayed and deceived by KPC and other ministry officials throughout this process," Suwarna lamented.
A spokeswoman for Rio Tinto said the ongoing legal proceedings against KPC was hampering the divestment process, which was slated for completion by the end of this month.
She said the company would make an offer to the East Kalimantan province only after it dropped the lawsuit.