Timah scraps plan to buy KPC shares

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)