House asks KPC to soon start divestment program

House of Representatives has sent a letter to the Minister of Energy and Mineral Resources Purnomo Yusgiantoro to formally ask the government to request PT Kaltim Prima Coal (KPC) to start its divestment process before the July 31 deadline, Kompas reported on Tuesday.

In a letter signed by deputy chairman of the House A.M. Fatwa, the ministry was asked to coordinate with the East Kalimantan provincial administration in preparing the auction of the coal producer?s 51 percent share.

The House also asked the ministry in the letter to give a priority to East Kalimantan administration to join the auction of the coal mining company?s 51 percent share. The request was based on the recent meeting of the House?s internal commission, which among others recommended the government to request KPC to carry out its divestment plan under the contract of works signed with the company.

In doing do, the government was also asked to consider the result of the recent meeting between the sub commission of the House and the inter-governmental team in charge of KPC divestment, Governor of East Kalimantan, members of East Kalimantan Legislative Council and Regent of East Kalimantan?s East Kutai regency.

The meeting agreed that the 51 percent shares, which would be divested by KPC, should be sold to the central government and East Kalimantan government. At the same time, the East Kalimantan agreed to drop its legal suit against KPC shareholders to pave the way for the resumption of the divestment plan.

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. According to the initial schedule, the divestment should be completed by July 31.

However, the mandatory divestment program does not run as expected due to a dispute over the percentage of the shares that must be sold to the central and local government. This has prompted the local authority to fill a legal suit to the Ministry of Energy and Mineral Resources and KPC shareholders for allegedly barring it from buying the entire 51 percent stake. The court accepted the request and then seized the company?s shares to guarantee that the shares would not sold to other parties.

Last week, the provincial administration of East Kalimantan said that it had formally withdrawn its legal suit but KPC says that it waits for the confirmation from the court before starting the divestment process.(*)