East Kutai, East Kalimantan agree to suspend KPC operation
Friday, July 27 2001 - 04:13 AM WIB
The agreement was reached during a meeting between the East Kutai regency council and the East Kalimantan?s provincial council?s special commission for KPC divestment from 8 p.m. to 11 p.m. at the East Kutai council in Sangatta, local daily Kaltim Post reported on Friday.
The paper quoted secretary to the special commission Andi Harun as saying that both parties agreed that KPC should stop production until the government appoints a new contractor to take over its operation.
No East Kutai councilors were quoted to confirm Andi?s statement.
The special commission has asked the central government to suspend KPC?s operation in Sangatta following its frustration over the rejection by KPC?s shareholders of its price proposal for the stake in the coal company.
KPC?s shareholders ? Anglo-American energy firm BP PLC and Anglo-Australian firm Rio Tinto ? have agreed to sell 51 percent of their stake in the coal company this year in accordance of the contract with the Indonesian government and the East Kalimantan provincial administration had agreed to buy the stake.
But, the divestment has stalled due to the wide gap between the price set by BP and Rio Tinto and the one proposed by the special commission. BP and Rio Tinto value the 51 percent stake at US$448.8 million, while the commission set the price at $319.08 million. The ministry of energy and mineral resources values the stake at $309.9 million.
In a move to pressure KPC, the commission demanded the government to stop KPC?s operation and transfer the operation to other contractors.
But, the East Kutai regency council opposed the move.
?We don?t want the public to become the victims of the divestment. If it is closed, the people living around the mine and the 10,000 workers of the company who live in the area will lose jobs,? East Kutai?s council speaker Abdal Nanang once said.
According to the paper, the Thursday meeting was chaired by Abdal.
Andi said both East Kutai council and the commission agreed that KPC should continue paying the salaries of its workers during the suspension.
When asked for comments, secretary to the East Kalimantan provincial administration HS Sjafran said the commission?s proposal should be further studied to see the likely benefits and losses resulting from the suspension of the coal operation. (*)