East Kalimantan intensifies media campaign against KPC sale
Wednesday, July 30 2003 - 03:24 AM WIB
In a joint advertisement published in the Media Indonesia daily, the provincial administration and the lawmakers protested the sale due to a number of reasons.
First, the contract of work (PKP2B) for coal mining in East Kalimantan?s Sangatta area, approved by the government of Indonesia on Oct. 31, 1981, was given to a joint venture between BP (formerly known as The British Petroleum Ltd) and Rio Tinto (formerly knownas Conzine Riotinto of Australia Ltd.), not to PT Bumi Resources.
The statement said that BP and Rio Tinto latter formed a joint venture called KPC. And based on the Indonesian law, BP and Rio Tinto can hold ownership in KPC via their respective subsidiaries: Coal Indonesia Ltd (owned by BP) and Sangatta Holding (Rio Tinto), as long as the parent company are still BP and Rito Tinto, not Bumi Resources nor its majority owner Long Hauld Holding Ltd. (BP and Rio Tinto have decided to sell the two subsidiaries, which are the equal owners of KPC, to Bumi Resources).
Second, according to chapter 26 of the PKP2B contract, the divestment of KPC stake must be made to Indonesian government (central government, or East Kalimantan provincial or regency administration, or Indonesian investor or companies owned/controlled by Indonesian citizen. This chapter also forbids the shares to be sold to foreign investor.
The statement said that Bumi Resources is an Indonesian compmany but controlled by foreign investors namely: Long Haul Holding (majority owner of Bumi, which is registered in New Castle, UK.. Another key shareholder is Minarak Labuan Ltd, registered in Labuan, Malaysia.
Third, KPC (BP and Rio Tinto) have asked a price of US$889 million for 100 percent shares in the coal mining; but KPC and the Ministry of Energy and Mineral Resources latter agreed to a price of $822 million (March 6, 2002), which means that the price of a 51 percent shares offered by KPC and has been accepted by East Kalimantan is about 419.22 million.
The statement said that KPC (BP and Rio Tinto) has tried to hamper its divestment obligation by not allowing East Kalimantan owned companies to conduct a proper due dilligence on the coal company. The East Kalimantan administration questioned why BP and Rito Tinto then sold a 100 percent shares in KPC to Bumi Resources at a cheaper price of only $500 million, -- and if deducted by the company?s debt of $187 million, the real price is only around $313 million.
Fourth, KPC (BP and Rio Tinto) has offered a 51 percent stake to the government (July 31, 2002). The government has allocated the 51 percent stake to state-owned coal mining firm PT Tambang Batubarta Bukit Asam (20 percent), and to East Kalimantan (31 percent). The decision is made at a Cabinet meeting July 31, 2002. The East Kalimtan portion would then be distributed between companies owned by the provincial administration and the East Kutai regency government (based on Oct 31, 2002 economics ministers meeting).
The statement also accussed that KPC?s operation for years have been merely used to serve the interest of foreign investors: BP and Rio Tinto, which do not want to see a national entity to control the coal mining.
?Why and what is the reason of BP and Rio Tinto to sell 100 percent shares of KPC, directly or indirectly, to PT Bumi Resources? Is there any secret deal providing guarantee to BP and Rio Tinto that KPC would continue to serve the interest of foreign investor? ? If not, why (BP and Rio Tinto) declined to fulfill its divestment obligation and sell shares to the government,? the joint statement said. (amoros)