Bumi says huge debts would be serviced, waits for gov?t decision for divestment
Monday, October 13 2003 - 11:15 AM WIB
?We are optimistic to be able to service the debts from our cashflow, as we predict coal price will remain strong over the next few years,? said Bumi president Ari S. Hudaya, who is also president of KPC.
Bumi had paid US$500 million to former owner Anglo-Australian mining giant Rio Tinto and to Anglo-American energy giant Bp Plc. On October 10, to complete down payment of $40 million it made in July 2003.
The company had raised US$404 million in short term debts from syndication of international financial companies which comprise Singaporean bank United Overseas Bank (UOB) and Credit Suisse Fisrt Boston ($318 million, combined), Australia?s Macquarie Bank ($45 million) and German-based Leighton Financial International ($40 million). Bumi had also arranged another debt of US$ 54 million from another sources.
According to Ari, maturity of the debts ranged between 2-5 years. He, however, declined to reveal the costs of the debts.
An industry source contacted by Petromindo.Com said that Bumi would very likely not able to pay all the debts in 5 year?s time. ?They would likely issue new debts,? said the source. Although KPC?s operations were profitable, interest payment would deteriorate the company?s bottom line. ?At 7 percent per annum interest, it would cost the company more than $30 million per annum. It would eat up the company?s profitability,? said the source.
Ari, however, was optimistic KPC?s coal products would average $30 per ton in the next few years, with production cost of around $18 per ton. ?That would generate revenue of $600 million annually,? he said. He did not say KPC?s earnings expectation when interest costs is incorporated to production cost.
In 2002, KPC contributes $52 million in net earnings to its former owners.
KPC is planning to increase production from 18 million tons this year to 23 million tons in 2004.
Meanwhile, Ari also said Bumi is ready to divest 51 percent of its shares in KPC should the government still requires so. ?We are ready to divest our shares in KPC and would comply to government?s decision,? he said.
Under the coal contract of work, KPC former owners are required to divest al least 51 percent of KPC?s shares to Indonesian-owned entities after 10 years of commercial operations. Prior to Bumi?s takeover, BP and Rio Tinto are required by the government to sell 31 percent shares of KPC to East Kalimantan provincial government and 20 percent to state coalmining firm PT. Tambang Batubara Bukit Asam (PTBA).
?But, we would want the process to be business-to-business deal,? he said.
East Kalimantan government, who is backed by a local business tycoon-linked to Salim group, had been insisting that it was still entitled to acquire shares of KPC despite KPC ownership is now 100 percent local.
Government had earlier said that the sale of KPC to Bumi Resources did not alter the obligation of KPC?s new owner to divest 51 percent stake to Indonesian companies.(alex/godang)