Government terminates coal contract of Asmin Koalindo

The Ministry of Energy and Mineral Resources has terminated the coal contract of work (PKP2B) of Central Kalimantan coking coal miner PT Asmin Koalindo Tuhup (AKT) as the company has breached the terms of the contract, kontan.co.id reported on Monday.

Minister of Energy and Mineral Resources Ignasius Jonan signed the contract termination letter on October 19, a copy of which was obtained by the news portal.

According to the letter, AKT has breached the contract because it had signed an agreement to provide guarantee on a loan facility provided by Standard Chartered Bank to its parent IDX-listed coking coal firm PT Borneo Lumbung Energi & Metal Tbk (BORN). The signing of the corporate guarantee was made without written approval from the minister, which is considered as a breach of the PKP2B.

The letter said that AKT had also been given two warning letters for the negligence, but until the end of the default status, the company has failed to fix the negligence, leading the minister to terminate the May 1999 PKP2B contract of AKT.

With the termination of the contract, AKT?s 21,630 ha coal concession in Murung Raya Regency, Central Kalimantan Province, will be returned back to the government, which will be declared later by the government as state reserves area (WPN) or assigned a new special mining business license (WIUPK).

AKT is also required to pay its entire unsettled financial obligations to the state, and must implement liquidation process of the company in accordance with existing regulations. The contract termination letter was effective immediately.

BORN in 2012 took a US$1 billion loan from Standard Chartered Bank, assigning AKT to provide corporate guarantee. But AKT has been under debt payment suspension since 2016 as the company management declines to acknowledge the corporate guarantee on the debt as it was made without the approval of the Ministry of Energy and Mineral Resources.

The termination of the AKT mining contract has also put in limbo the fate of the company?s other creditors. The company and the creditors reached a debt restructuring agreement last year, which was approved by the court in April 2016. (*)