Local investor backs bid for KPC stake

Local investor backs bid for KPC stake

JAKARTA (JP): East Kalimantan said on Tuesday that a local
investor was backing the province's bid to acquire a 51 percent
stake in foreign owned coal mining company PT Kaltim Prima Coal
(KPC) operating in the province.

"It's a local investor with much (mining) experience," East
Kalimantan Governor Suwarna Abdul Fatah said on the sidelines of
a hearing between several governors of resource-rich provinces
and House of Representatives Commission VIII for mines and energy
affairs.

Suwarna refused to name the investor, saying that the
information was confidential.

East Kalimantan has been urging the central government to
allow it to obtain a 51 percent stake in KPC, though never
disclosing its source of funding.

KPC is jointly owned by Anglo-Australian mining company Rio
Tinto and British-American oil and gas company Beyond Petroleum
(BP).

Under its contract of work, KPC must gradually divest at least
51 percent of its shares between the fifth and the 10th year of
commercial production, which began in 1992.

The company must sell the shares to either individual local
investors, the government or Indonesian state-owned or private
enterprises.

At present, the East Kalimantan government is the sole bidder
for KPC's stake.

The government has said it will only approve East Kalimantan's
bid if the latter could provide details of its funding source and
the conditions attached.

The province is allowed to seek third party funding as long as
the party is Indonesian.

But thus far, East Kalimantan and KPC remain in dispute as to
how much the company must divest this year.

According to KPC's shareholders, the company must divest only
44 percent of its shares to local investors this year.

"We're still fighting to get the 51 percent stake," Governor
Suwarna went on to say.

He said he hoped the Ministry of Energy and Mineral Resources
could mediate in negotiations between the province and KPC.

"We're hoping that minister Purnomo will become our mediator,"
he said in reference to Purnomo Yusgiantoro, the minister of
energy and mineral resources.

Suwarna further denied earlier media reports that the province
agreed to an independent lawyer solving the dispute.

Local media and The Jakarta Post quoted Ministry of Energy and
Mineral Resource's secretary-general Djoko Darmono as saying that
the province and KPC would settle their differences through an
independent lawyer.

Djoko said that lawyers representing both sides made different
evaluations of KPC's divestment terms, so that they agreed to
appoint an independent one.

Saleh, however, said the province preferred to discuss the
issue without involving outside parties.

"In settling this issue, let's come face to face, their lawyer
and ours, and then exchange arguments to find out who is right,"
he explained.

According to him, the appointment of an independent lawyer had
been KPC's suggestion.

Before East Kalimantan, state-owned tin mining company PT
Tambang Timah became the first to bid for KPC's stake in 1999.

Timah withdrew its bid upon deeming KPC's shares too
expensive.

In 1999, the government valued a 30 percent stake in KPC at
US$175 million. (bkm)