Govt to order KPC to sell 20% stake to Bukit Asam

The government will order East Kalimantan-based coal mining company Kaltim Prima Coal (KPC) to sell a 20 percent to 25 percent stake to state coal mining company PT Bukit Asam, a senior official at the Ministry of Energy and Mineral Resources said.

The government will also ask KPC -- a joint venture between Anglo-Australian mining company Rio Tinto PLC and Anglo-American energy firm BP PLC -- to sell a further 26 percent to 31 percent stake in the mine to the East Kalimantan provincial government and other local investors, Djoko Darmono, the ministry's secretary-general, was quoted by Dow Jones as saying on Friday.

KPC's 30-year operating contract, drawn up under former president Soeharto in 1982, stipulated that the company must sell a 51 percent stake valued at US$410 million to an Indonesian investor by the end of last year.

But the contract failed to determine who should get the first claim to the stake, which has sparked a heated dispute over the rightful ownership of the mine and delayed the sale.

East Kalimantan's government, allegedly backed up by several local firms, has sought to control the 51 percent stake and filed a lawsuit against the company at the South Jakarta District Court in a bid to pressure the company to sell its stake to the province. Pending the final outcome of the case, the court has issued an injunction to sequester BP and Rio Tinto's Indonesian assets.

Unfazed, KPC has insisted that there was no clause in the contract stipulating that the stake must be sold to the province and warned that it would not carry out the divestment process until the province revoked its lawsuit.

Djoko said the ministry would send a letter to the provincial government on Monday threatening legal action unless it withdraws its suit by the end of this month.

Analysts said the central government's order for KPC to sell a part of the stake to Bukit Asam would please the company as it would deny the East Kalimantan province's chance to become a majority shareholder in the coal firm. That would allow both Rio Tinto and BP to retain control of the company as majority shareholders.

But some analysts predict the province will react angrily to the central government's policy and go out of its way to shoot it down. The province's financial backers would not be interested in buying the stake if they could not become a majority shareholder in the firm.(*)