Rio Tinto, BP, agree to sell KPC

Rio Tinto, BP, agree to sell KPC

Dow Jones, Jakarta

After years of dispute with various parties in the country, Anglo-American energy giant BP Plc has finally agreed to sell its 50 percent interest in coal mining company PT Kaltim Prima Coal (KPC) to PT Bumi Resources, an Indonesian-controlled resources company.

BP's equal partner in KPC, Anglo-Australian energy company Rio Tinto, has reached a similar agreement with the result that, on completion of the sale, KPC will be wholly owned by Bumi Resources, BP said in a press statement.

Bumi Resources will purchase BP's and Rio Tinto's interests in KPC together for US$500 million in cash, including assumed debt, which will be divided equally between BP and Rio Tinto. Subject to approval by Bumi Resources' shareholders and other approvals, the parties anticipate completion of the deal in October 2003.

Under a contract signed by KPC during former president Soeharto's tenure, the company must sell 51 percent of its stake to either the government, state-owned companies, Indonesian- controlled private companies or Indonesian citizens.

Enactment of the Regional Autonomy Law in 1999 prompted the East Kalimantan government to demand a slice of the cake.

The central government and the East Kalimantan government became entangled in a dispute in which each party appointed companies to buy KPC's stakes.

Having sold its other coal interests in 1989 and 1990, BP's shareholding in KPC is its only interest in coal operations worldwide.

The financial advisor on the transaction is JP Morgan. Linklaters is acting as legal counsel to BP on the sale.

KPC operates a coal mine located near Sangatta in East Kalimantan. The mine produces 18 million tons of steam coal annually for export to markets in the Asia-Pacific region, Europe and the United States.

Rio Tinto and BP will work with Bumi Resources to ensure a smooth transition of ownership and are committed to ensuring that there will be no impact on service to customers.

Listed on the Jakarta and Surabaya stock exchanges, Bumi Resources is controlled by PT Bakrie Capital Indonesia, a unit of the Bakrie group. Established in 1973, the firm is engaged in mining, oil and hotel businesses. It has several oil concessions in Yemen and owns 80 percent of PT Arutmin Indonesia, which is one of the country's largest coal producers.