Shareholders of KPC agree on 51% divestment

Shareholders of KPC agree on 51% divestment

JAKARTA (JP): Shareholders of coal mining company PT Kaltim
Prima Coal (KPC) in East Kalimantan have eventually agreed to
divest 51 percent of their shares in the company this year, a
senior government official said on Friday.

Secretary-general at the Ministry of Energy and Mineral
resources Djoko Darmono said KPC's shareholders Anglo-Australian
mining company Rio Tinto, and British-American oil and gas
company Beyond Petroleum (BP) agreed last Tuesday to sell a 51
percent stake to local investors.

"We've reached an amiable agreement," Djoko told reporters.

Both BP and Rio Tinto earlier insisted that they should only
divest 44 percent of their stake in KPC.

But Djoko said in Tuesday's meeting between BP, Rio Tinto and
the government it was concluded that they would give up their
majority stake in KPC this year.

BP and Rio Tinto each own a 50 percent stake in KPC.

Being a wholly foreign-owned mining company, KPC must
gradually divest at least 51 percent of its shares between the
fifth and tenth year of commercial production, which began in
1992.

KPC must sell the shares to either Indonesian citizens, the
government, or state-owned companies or private companies,
controlled by Indonesians.

"As for the value of KPC's 51 percent stake, it's up to them,"
Djoko went on saying.

He said valuing the 51 percent stake in KPC was a business
concern in which the government would not meddle.

In 1999, however, the government interfered in talks to
determine the selling price for a 30 percent stake in KPC.

That year, publicly listed tin mining company PT Timah
canceled plans to acquire the stake from KPC, as it deemed the
selling price too high.

The government subsequently hired Bahana Securities to
negotiate with KPC's appointed consultant Jardine Flemming on the
price of the 30 percent stake.

Jardine first valued the stake at US$200 million, but later
lowered it to $175 million following negotiations with Bahana.

At present, the only party interested in KPC is the East
Kalimantan government.

Since last year, East Kalimantan's local government has been
urging the government and KPC to let it buy a majority stake.

Djoko said the government would leave it to East Kalimantan's
administration and KPC to determine the value of the 51 percent
stake in KPC.

"Let's wait for them to negotiate, this is a business to
business issue," he explained.

So far, the East Kalimantan local government has been tight-
lipped on questions as to who its financial backers were.

East Kalimantan governor Suwarna Abdul Fatah has said that a
local investor with broad mining experience would finance the
purchase of KPC's 51 percent stake.

The refusal of the provincial administration to reveal the
identity of the investor has raised suspicions that it might be a
foreign party.

Djoko earlier said the ministry would block the province's
acquisition plan if it was backed financially by foreign
investors.

KPC produces about 15 million tons of coal annually, but a
three-month-long strike last year cut production to 13.5 million
tons.

Strikes still plague the mining company today, as workers of
one of its contractors have abandoned work and taken over heavy
mining equipment since early February.

As a result, the company's daily production has dropped by 30
percent, or down to 35,000 tons, from its normal output of 50,000
tons per day. (bkm)