East Kalimantan demands new deadline for KPC divestment

The provincial administration of East Kalimantan will ask President Megawati Soekarnoputri to take a firm action on the mandatory divestment of the 51 percent shares of coal producer Kaltim Prima Coal, a local newspaper reported on Monday.

?The government should, for example, set a new deadline in the divestment plan so that no more delays will take place,? the secretary of the provincial administration, Syaiful Teten, was quoted as saying by Kaltim Post.

He said that the new deadline would be quite needed to ensure that the existing divestment plan would go as earlier planned even if there would be a change in the new government?s policy after the general elections in the middle of this year.

KPC?s former shareholders, Rio Tinto and BP, were required to divest up to 51 percent of its stake in the coal producer two years ago as part of the mandatory divestment requirement stated in the company?s contract of works.

The divestment could not be carried out as expected because the East Kalimantan provincial administration insisted to buy all of the 51 percent shares, which are worth US$419 million. Besides this problem, the high price demanded by Rio Tinto and BP had caused a long delay in the divestment.

Surprisingly, when the negotiations to break the deadlock were still going on, Rio Tinto and BP secretly sold their entire stake in the coal producer to Bumi Resources. Although the new shareholder agreed to continue the divestment process, similar problems still hampered the divestment program. (*)