Government opposes fictive consortium behind KPC takeover

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said on Wednesday that the central government opposed the East Kalimantan?s bid to take over the entire 51 percent stake of PT Kaltim Prima Coal on fears that the provincial administration would form a fictive consortium with a private company to carry out the deal.

Speaking at a hearing with the Commission VIII of the House of Representatives (DPR), Purnomo said that if the consortium is allowed to take over the whole 51 percent stake that would be divested by KPC, it would violate the contracts.

"If we allow the provincial administration to take over the 51 percent stake of KPC, it will prompt the company to file a legal suit against the government," the minister was quoted as saying.

The minister said that none of state owned or local government-owned companies had enough funds to buy the 51 percent share. "Even if the shares are divided into two parts such as by 20 and 31 percent, none of such companies have enough funds to finance the take over," he said.

Under the contracts of works, KPC, which is owned by world mining giants Rio Tinto and BP, is required to divest 51 percent of their shares to Indonesian companies (state owned companies, private companies, and local investors).

Several companies have expressed their keen interest to cooperate with the East Kalimantan administration to buy KPC?s 51 percent stake. PT Intan Bumi Inti Pertama for example has openly offered 10 percent of the shares to the local government if it is allowed to join the deal. In addition the company is also ready to provide US$7 million to the local government for community development.

Newspapers have reported that KPC?s existing shareholders would oppose any deal if the takeover is carried out by a single company. This is important to ensure that they will remain as a majority shareholder. (*)