FOCUS: KPC acquisition won?t affect coal production
Thursday, July 24 2003 - 05:56 AM WIB
The surprise acquisition of coal miner PT Kaltim Prima Coal (KPC) by PT Bumi Resources has infuriated many parties, including Minister of State-Owned Enterprises Laksamana Sukardi and the provincial administration of East Kalimantan.
Laksamana has said he would summon BP PLC and Rio Tinto, the previous owners of KPC, to explain the sudden sale of their entire stake in the country?s second largest coal firm.
Meanwhile, East Kalimantan?s governor Suwarna AF, who spearheaded the years-long campaign for the province to take control of the firm, has threatened to stop the operations of the coal miner. Voicing supports to the governor, some provincial councilor urged him to take all possible ways, including the ?illegal one?, to stop KPC?s operations.
Indeed, some people now anticipate that KPC will face a lot of troubles in its operations and as such buyers risk failing to get supplies. The firm, which last year produced 16 million tons of coal, is seeking to increase its output to 18 million tons this year.
However, well-informed sources both in the government?s offices and the industry, told Petromindo.Com that despite the threat and anger, KPC would continue its operations normally.
They said Bumi Resources, which is controlled by Indonesian rich family the Bakries, BP and particularly Rio Tinto, the Anglo-Australian mining giant, have made sure that the interest of KPC coal buyers is still well protected after the change in the company?s ownership.
Perhaps, BP doesn?t care much about what happens after the acquisition as the company has said it is no longer interested in coal business and wants to focus on oil and gas business. But, Rio Tinto, one of the world?s largest mining companies, did not surely want the deal would damage its reputation as ?reliable? coal supplier among the global community. Rio Tinto finally agreed to sell its 50 stake in KPC to Bumi Resources because it had been assured that KPC, under the new owner, would meet all long-term contract obligations to buyers, the sources said.
Sources believe that Rio Tinto has a deal with Bumi Resources that after the acquisition, the former will still handle the marketing of KPC coal ? the same deal made by Bumi Resources when it acquired a 80 percent stake in South Kalimantan-based PT Arutmin Indonesia, the country?s fourth largest coal miner, from Australian mining giant BHP Billiton. However, Rio Tinto refuses to confirm this.
KPC exports 95 percent of its coal output. It has contracts with major utilities including Taiwan Power Company, Hokuriku, Chubu and Tohoku Power companies in Japan, Tenaga Nasional Berhad in Malaysia, AES Hawai and FPEC in China. It also supplies coal to major steel firms, including Kawasaki, Kobe, Nippon Steel, Nisshin and NKK in Japan, Corus in the UK/Netherlands and CSN in Brazil, which uses Prima Coal for pulverized injection into blast furnaces.
The firm also has customers in the United States, India, the Philippines, Italy and Portugal.
Sources said key persons in the East Kalimantan administration and the East Kutai regency administration, which hosts KPC, had been informed about the deal between Bumi Resources, Rio Tinto and BP, before they publicly announced the deal on Monday. The key persons, including Governor Suwarna and Regent Mahyudin, voiced supports to the deal as Bumi Resources had promised to give the province and regency some stake in KPC ?for free?: The administrations will pay for the stakes using dividends to be distributed to the administrations annually.
Sources said the governor publicly protested the deal to show to David Lim, the owner of PT Intan Bumi Inti Perdana, that the provincial administration has not betrayed him.
David, who is a relative of Indonesia?s former richest tycoon Soedono Salim, has financially backed up the province in its efforts to gain control of KPC.
Rumors in the industry also say that retired army Lieutenant General Prabowo Subianto, the former commander of Indonesia?s special force Kopassus, has promised to provide KPC with security after it was taken over by Bumi Resources. The retired general, who is close to the Jordanian royal family, is now active in business and has bought many firms owned by friends of former President Soeharto. However, it remains unclear if he will also provide financial supports to Bumi Resources.
Bumi Resources, which buys KPC for US$500 million, said on Wednesday that it would obtain syndicated loans from a number of banks, including Credit Suisse First Boston, to finance the acquisition.
Sources also said in its bid to buy out KPC, Bumi Resources had also gained supports from the Golkar party, the country?s second largest party, where Suwarna is a member, and top politicians close to the presidential palace.