Divestment issue hampers contract renegotiation with BHP

The Ministry of Energy and Mineral Resources is expected to resume mining contract renegotiation process this week with Australia?s BPH Billiton Ltd, which controls seven coal mining firms in Central Kalimantan, focusing on the tough issue of divestment obligation, Kontan reported on Monday.

?We?re scheduled to meet with them this week, hopefully we could reach an agreement,? Director General of Mineral and Coal at the ministry, R. Sukhyar told the paper.

Meanwhile, Coal Chief at the Directorate Bambang Tjahjono was quoted by the The Jakarta Post Monday as saying that the government wants BHP Billiton to divest up to 51 percent stakes in the seven subsidiaries in accordance with the law.

?The debated point in the renegotiation is about divestment. The parent company (BHP Billiton) still wants to control (the subsidiaries) while we are asking for a divestment of 51 percent within 10 years after production, based on the law,? Bambang said as quoted by The Post.

BPH Billion is the parent firm of PT IndoMet Coal Project, which has seven coal mining firms holding the PKP2B coal contracts of work including PT Ratah Coal, PT Juloi Coal, PT Lahai Coal, PT Pari Coal, PT Sumber Barito Coal, PT Kalteng Coal, and PT Maruwai Coal.

The government has been struggling to conclude mining contract renegotiation with miners in the country that would lead to the amend of their mining contracts as stipulated by the 2009 Mining Law. There are six points of contract renegotiation proposed by the government including divestment obligation for assets controlled by foreign firms.

As of September 27, Sukhyar said that 73 mining firms out of 107 holding the so-called KK mining contracts and PKP2B coal contracts have signed MoUs on the conclusion of the mining contract renegotiation with the government that would eventually lead to the contract amendment. He hopes that the remainders could be concluded before the end of the current administration?s term in October. (*)