East Kalimantan given no exclusive rights to buy KPC shares

The ambition of the East Kalimantan administration to control the majority ownership of PT Kaltim Prima Coal ended on Tuesday with the central government?s decision not to give exclusive rights to the provincial authority to buy the company?s 51 percent share, Kaltim Post reported on Wednesday.

"The inter-government team has recommended the ministry of energy and mineral resources not to give exclusive rights to the East Kalimantan authority to buy the 51 percent stake in KPC. The winner will comprise of several bidders," Minister of Energy and Mineral Resources Purnomo Yusgiantoro told reporters.

The government will soon begin the process of the divestment of KPC?s 51 percent share by identifying all bidders, which have expressed interest to join the bidding, and then carry out due diligence and proper test on the selected bidders, the minister said.

"From that process, the government will decide the winners. The most important thing is that the government will not ignore the local aspiration," he added.

KPC, which operates a large coal mining area in East Kalimantan, is equally owned by world mining giants Rio Tinto and BP. Under its contracts of works, the company?s shareholders are required to divest 51 percent of their shares to local investors.

However the divestment program does not run as expected due to dispute with the East Kalimantan provincial administration, which recently filed a legal suit against the existing shareholders for allegedly barring it from bidding the 51 percent share.

The local government said that the existing shareholders had placed a high price on the company?s shares in order to prevent it from buying the shares.

KPC shareholders and the central government, through the Ministry of Energy and Mineral Resources then agreed to lower the price of the 51 percent stake to US$419.22 million. But the local government still refused to drop its legal suit, causing a further stalemate in the divestment program.

Besides the East Kalimantan administration, several other local investors have also filed their bids to buy KPC?s 51 percent stake. They include PT Intam Bumi Inti Perkasa (IBIB), which is owned by David Liem, PT Borneo Batubara (owned by Reynaldo Thamrin), PT Bumi Resources (Bakrie Group). PT E Securities, and PT Nusantara (owned by Prabowo Subyanto). Several state owned companies are also reported to have found a consortium to buy KPC?s 51 percent.

A number of state owned companies including state owned electricity company PLN, state owned coal mining company PT Batubara Bukit Asam, and general mining company PT Aneka Tambang have also expressed their interest to buy KPC?s 51 percent stake. (*)