Bumi divests coal firms, changes focus
Saturday, March 18 2006 - 01:33 AM WIB
Bumi Resources president Ari Saptari Hudaya said that the company would sell 95 percent of PT Kaltim Prima Coal and 100 percent of PT Arutmin Indonesia and Indo Coal Resources Ltd. to a local consortium led by PT Borneo Lumbung Energy, an affiliate of Jakarta-based PT Renaissance Capital, which is controlled by former Deloitte Touche Samin Tohamatsu partner Samin Tan.
?The transaction is subject to customary completion conditions including shareholder approval,? Ari said.
A spokesman for Marubeni Corp told Bloomberg that the Japanese conglomerate might also join the consortium. A source had earlier informed The Jakarta Post that U.S.based Farralon Capital Investment would be part of the consortium but its name did not appear on Ari?s list of buyers.
If the transaction goes through, Bumi will receive a hefty capital gain of at least US$2.5 billion from the divestment, the second largest ever conducted by a local company after the US$52. billion divestment of the Sampoerna family?s entire stake in clove cigarette producer H.M. Sampoerna.
Bumi, which is controlled by the family of the coordinating minister for the people?s welfare, Aburizal Bakrie, bought 80 percent of Arutmin from BHP Billiton in 2001 for US$ 148.5 million and 20 percent from the Bakrie Group for $37 million. Two years later, Bumi bought 100 percent of Kaltim Prima for $500. million from BP Plc and Rio Tinto Group.
Bumi?s full takeover of KPC caused a furor at the time as a government team back then was finalizing negotiations on the sale of a 51 percent stake in the East Kalimantan firm to the local government.
BP and Rio Tinto were required to sell their 51 percent stake in the late 1990s to Indonesian entities to meet mandatory divestment requirements under the government?s mining legislation. But negotiations over the divestment to the local government had been bogged down for several years, forcing the Energy and Mineral Resources Ministry to set up a special negotiating team.
KPC and Arutmin, which produced 21.4 million and 14.6 million tons of coal respectively last year, are among the largest coal miners in the country. A sharp increase in coal prices has helped Bumi?s shares increase 49-fold since October 2002.
Bumi?s shares were suspended from trading by the Jakarta Stock Exchange on Friday, pending more details on the transaction. The shares had gained 5.4 percent Thursday to close at a record Rp 980.
Analysts estimate that Bumi?s profit jumped more than 80 percent last year on rising exports to China and other Asian nations.
Bumi is estimated to have earned Rp 2.19 trillion ($237 million) in the year ended December 31. Its earnings may rise another 12 percent to Rp 2.46 trillion in 2006, according to the median of five recent forecasts by Thomson Financial as reported by Bloomberg.
The news on the divestment of Bumi?s stakes in its three coal-mining companies has come as a surprise given that many investors are currently rushing to get into the coal mining industry, which has become one of the most profitable business in the country following the surge in global coal prices over the last two years.
But Bumi?s president, Ari, said the sale of the company?s coal assets was fully in line with its, strategy of becoming the country?s best performing energy and natural resources company.
He said the sale of the stakes would allow Bumi to realign its focus on the energy and natural resources sectors, which management believed held out the prospect of greater long-term benefits for Bumi.
?The company will continue to actively seek business opportunities in the oil, natural gas, minerals and alternative energy sectors,? he explained.
He also said that the company would spend $1.5 billion of the divestment proceeds on setting up plants to turn coal into diesel in Kalimantan and Sumatra. (*)