Foreign banks allowed to finance purchases of KPC shares

State Minister for the Supervision of State Owned Enterprises Laksamana Sukardi said the provincial administration of East Kalimantan is allowed to seek foreign funding to finance its purchase of PT Kaltim Prima Coal?s 31 percent shares.

"Foreign parties are not allowed to purchase the coal producer?s shares or hold the company?s shares. But if they provide the funding for the purchase of the shares, it is not a problem at all," the minister said as reported by Koran Tempo on Tuesday.

According to the minister, if there is a foreign bank interested in providing funds to finance the purchase of KPC?s shares, it means there is a trust from the foreign banks in Indonesia. "It is positive because there will be inflow of funds into the country," 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.

The mandatory divestment program has been delayed for at least three years due to a dispute over the percentage of the shares that must be sold to the central and local government. The local administration had demanded to buy all of the 51 percent stake.

According to the latest compromise, 31 percent of the 51 percent of KPC shares would be sold to the provincial administration and another 20 percent to the central government. The East Kalimantan administration has named PT Melati Bakti Satya and PT Kutai Energi to represent it in the purchase of the 31 percent. (*)