Govt threatens to take KPC to international arbitration

The government has threatened to take East Kalimantan-based coal operator Kaltim Prima Coal (KPC) to an international arbitration if the company refuses to allow bidders of the company?s 51 percent shares to carry out due diligence audit on the company, Bisnis Indonesia reported on Thursday.

"If KPC refused to allow the due diligence process, the company will receive a penalty as stipulated in the article 23 of the company?s contract of works," the head of the team for the divestment of KPC?s 51 percent share, Roes Aryawijaya. He added that the contract of works clearly stipulated that any dispute arising between the government and KPC shareholders should be settled through an international arbitration.

Roes said that the government had given appointed bidders of KPC?s 51 percent share, state owned coal producer PT Batubara Bukit Asam (PTBA)and East Kalimantan authority through two appointed companies to carry out due diligence audit on KPC before finally settling the takeover plan.

"The three months time limit will become affective after KPC opens its data room," he was quoted as saying.

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 and due to difference perception in the due diligence audits.

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 local authority has appointed two local companies as the buyers of the 31 percent share while the central government has assigned PTBA as the buyer of the 20 percent share. (*)