Analyst says local administration should get KPC shares for free

The local East Kalimantan administration should get the shares of coal giant mining firm PT Kaltim Prima Coal (KPC) for free because the company has been exploiting the province's mining resources, according to analyst Iswan Priady.

"My question is very simple. Why should the people of East Kalimantan has to pay for some thing that they own," he told the local Kaltim Post daily.

Iswan said that the East Kalimantan administration must get between 20-30 percent shares of KPC for free.

KPC is obliged to divest its stake this year. The company claims that according to the contract with the government it has to divest 37 percent stake this year, and increasing by seven percent for each of the following year. But the local administration said that according to the contract KPC must already divest up to 51 percent stake this year. Earlier reports which said that the two had agreed on a 44 percent figure was denied by East Kalimantan Governor Suwarna AF.

Iswan said that it would be difficult to obtain some US$175 million in cash to buy a 37 percent stake in KPC.

He said that if the government would proceed with earlier plans to team up with Jakarta-based company PT Intan, which would finance the acquisition and provide the East Kalimantan administration with a 10 percent stake, the local administration would not get much benefit.

"I believe in a zero sum game," he said.

He also said that it would be difficult for the government to either get bank financing or sell bonds amid the current social and political uncertainty in the country.

"So the shares must be granted to the people of East Kalimantan," Iswandy said.

He said that if KPC persisted, the local administration should introduce a new retribution or pressure the government that the 13.5 percent royalty be fully given to the local administration. (*)