Controversies over due diligence audit hamper KPC?s divestment plan

Controversies over due diligence audit have again hampered the mandatory divestment of East Kalimantan-based coal producer PT Kaltim Prima Coal?s 51 percent as both the coal producer and the appointed buyers refused to be audited before settling the divestment deal, Suara Karya reported on Thursday.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro supported the idea that both companies should be audited before signing the purchase agreement. "I agree with the suggestion that due diligence audit should be conducted on both buyers and seller," he said in a discussion forum held by mine and energy journalists in Jakarta on Wednesday.

Attending the discussion included Noke Kiroyan, the president of KPC, Herman Afif Kusumo, an energy observer, Saiful Teteng, the secretary of East Kalimantan administration, Roes Arywidjaya, deputy of state minister for state owned enterprises and Simon F. Sembiring the head of research and development department of the ministry of energy and mineral resources.

The minister said that due diligence process on both buyers and seller as stated in the framework agreement between government and KPC should be completed before the end of this month. "If this schedule could not be met, the sale of the 31 percent of KPC shares to local companies could be suspended," he added.

Purnomo also hoped that the decision made by Samarinda district court recently to annul the validity of the framework agreement should be also be removed so that the divestment of KPC which has been delayed for years could be completed in February this year.

In the discussion forum, Saiful Teteng, the secretary of the East Kalimantan administration consistently opposed the due diligence audit. "The government no longer needs to audit PT Melati Bhakti Satya and PT Pertambangan dan Energi Kutai Timur because the two companies have been appointed as the buyers of KPC?s 31 percent in a limited cabinet meeting led by Coordinating Minister for Economy and Development Supervision Dorodjatun Kuntjoro-Jakti on Oct. 31," he said.

Meanwhile Deputy for External Relations of Rio Tinto, the owner of KPC?s 50 percent, Anang R, Noor, said that the two local companies had no right to carry out due diligence on KPC until it was audited as stated in the framework agreement.

After years of delay, the government finally decided to sell 31 percent of KPC?s shares to local companies ? PT Melati which is owned by the East Kalimantan provincial administration and PT Pertambangan dan Energi which is owned by the Kutai regency administration. The other 20 percent will be sold to state owned coal mining company PT Bukit Asam.

The local government previously demanded to buy all the 51 percent of KPC?s shares but the demand was strongly opposed by KPC shareholders, causing the delay of the mandatory divestment plan for more than three years. (*)