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)