Timah scraps plan to buy KPC shares

JAKARTA (JP): Publicly listed state mining company PT Tambang Timah announced on Monday it had dropped its plan to buy shares in coal mining company PT Kaltim Prima Coal (KPC), citing the high price of the shares as the reason.

Timah president Erry Riyana Hardjapemakas said that aside from price consideration, Timah dropped the acquisition plan because the East Kalimantan provincial administration was also interested in buying the shares.

This would block Timah's efforts to acquire a majority share in the coal company, Erry said.

"The prime reason is related to the price. But there is also a nontechnical factor, that is the East Kalimantan provincial administration's interest in buying the shares.

"We want to hold up to 51 percent of the shares in the company," Erry was quoted by Antara as saying.

Under the contract of work (COW), KPC is required to divest up to 51 percent of its shares between the fifth and 10th year of production to either the government, state companies, private companies controlled by Indonesians or to Indonesian citizens. It started production in 1992.

This year, the company is obliged to divest 30 percent of its shares.

The company operates a huge coal mine in Sangatta, East Kalimantan, which is equally owned by Anglo-Australian Rio Tinto and British Petroleum.

It is considered one of the world's largest coal mining companies with an output of 15 million tons per year.

After months of negotiations, the Ministry of Mines and Energy and KPC recently agreed on the price of US$175 million for the 30 percent share, down from KPC's initial price of $200 million and up from the ministry's price of $100 million.

The ministry then offered 25 percent of the shares to Timah and the remaining 5 percent to the East Kalimantan administration.

Erry said a reasonable price for the 30 percent share was $145 million.

He ruled out a partnership with the East Kalimantan administration to buy the shares.

"If we have to form a partnership with another party (to buy KPC shares), we shall never gain control (of KPC). Furthermore, there could be problems with the East Kalimantan administration," he said.

He noted, however, that Timah was ready to sit down at the negotiation table with KPC if the East Kalimantan administration withdrew its bid and the government gave the state company the chance to buy the shares.

In a related development, the coal director at the ministry, Soedjoko Tirtosoekotjo, said on Tuesday the government would ask the East Kalimantan administration to clarify its intention concerning KPC shares.

Soedjoko said the ministry would send a letter to the provincial administration asking whether it was still interested in buying the shares and if it had enough cash to purchase the shares in the near future.

He noted that under the ministry's agreement with KPC, any party interested in the shares should make a cash payment in three months after it applied for the shares.

If the East Kalimantan administration could not afford the shares, the government had the right to offer the shares to other prospective buyers, including domestic private companies and other companies partly owned by the government, Soedjoko said.

He said the East Kalimantan administration's intention to buy the share was commendable as the intention was in line with "the spirit of provincial autonomy".

Aside from the East Kalimantan administration and Timah, Soedjoko said, coal company PT Bahari Cakrawala Sebuku, which operates a coal mine on the island of Sebuku off South Kalimantan, had also shown an interest in KPC's shares, but the government had forbidden it from buying the shares since the company was only 25 percent controlled by Indonesian citizens. (jsk)