Govt plans to use state firms? funds to acquire KPC?s shares

The government is considering to use state-owned companies? funds to purchase 51 percent of major coal mining company Kaltim Prima Coal?s shares, a senior official has said.

The source said that the proposal to use the state company?s cash to buy KPC?s shares was discussed in a recent meeting but Minister of Finance still did not agree with the plan.

T.A. Nurwinakun, the spokesman for the Ministry of Energy and Mineral Resources, acknowledged that there was a proposal from a senior official to buy the stake with the state owned companies? funds during a recent meeting.

"But it was just a proposal and there was no a serious discussion on the issue," he was quoted as saying by Bisnis Indonesia. According to him, a number of options have been proposed to the Cabinet in dealing with the problem related to the divestment of KPC shares, 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.

However, the mandatory divestment program does not run as expected due to dispute with the East Kalimantan provincial administration, which recently filed a legal suit against the existing shareholders for allegedly barring it from bidding the 51 percent share.

The local government said that the existing shareholders had placed a high price on the company?s shares in order to prevent it from buying the shares.

KPC shareholders and the central government, through the Ministry of Energy and Mineral Resources then agreed to lower the price of the 51 percent stake to US$419.22 million. But the local government still refused to drop its legal suit, causing a further stalemate in the divestment program.

Besides the East Kalimantan administration, several other local investors have also filed their bids to buy KPC?s 51 percent stake. (*)