East Kutai to offer 13.6% stake in KPC to local companies

The administration of East Kutai regency will offer a 13.6 percent stake in the East Kalimantan-based coal producer Kaltim Prima Coal (KPC) to local companies if it could not find enough funds to settle the payment for 18.6 percent KPC shares allocated for the regency, Bisnis Indonesia reported on Thursday.

"If we could not obtain enough fund, we will sell 13.6 percent of the KPC shares to existing KPC shareholders and other local investors," the regency's regent Mahyuddin said.

He said that the East Kutai regency had no obligation to resell back the shares to Bumi Resources. "But Bumi Resources would remain as the first priority to buy the shares," he added.

Bumi Resouces agreed last year to sell KPC’s 18.6 percent shares to the regency for US$104 million as part of the coal producer's mandatory divestment. The sale agreement was made in October after Bumi Resouces took over the entire KPC shares from Anglo-Australian energy firm BP Plc and Anglo-Australian mining company Rio Tinto. The East Kutai regency, however, face difficulties in obtaining the funds for the purchase of the KPC shares.

Mahyuddin said that the regency, through its company Perusda Pertambangan and Energi, was still trying to obtain loan amounting to US$75 million from a UK-based company and another US$45 million from an American company to settle the payment. "The negotiation is still underway," he said.

Separately, Bumi Resouces head of investor relations, Martinus Peter T, said that under the existing agreement, the East Kutai regency should return the KPC shares to Bumi Resouces if it did not have funds to settle the purchase.

Bumi Resources is now in the process of divesting 51 percent of KPC shares to local investors as part of the mandatory divestment program stated in KPC's contract of works. KPC, which operates a huge coal mine in Sanggata, East Kutai, produced about 16.2 million tons of coal in 2003. (*)