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)