Indonesia Power withdraws from Kideco divestment plan

PT Indonesia Power, a subsidiary of the state owned electricity company PLN, has decided to cancel its plan to acquire the East Kalimantan-based coal producer PT Kideco Jaya Agung?s shares after its partner state owned coal producer PT Batubara Bukit Asam (PTBA) had withdrawn from the divestment plan, Bisnis Indonesia reported on Wednesday.

Indonesia Power?s director for development Djuwarno said in Jakarta on Tuesday that the company had formally sent a letter to Kideco?s consultant BNP Paribas notifying its withdrawal decision.

He acknowledged that buying a majority stake in Kideco had been the best alternative so far to meet the company?s program to have its own coal mining company. At present Indonesia Power, which operates all the power plants formerly owned by PLN, buys most of its coal needs from the country?s major coal producers under a long-term contract.

?But our plan to acquire Kideco?s majority stake relies very much on the decision of its partner PTBA,? Djuwono said, adding that PTBA had decided to withdraw from Kideco?s divestment because it felt it would not have the chance to control the majority stake in the coal producer.

He said that PTBA planned to buy at least 51 percent of Kideco?s shares but the total shares that would be available for the company and Indonesia Power were only about 41 percent.

Kideco, owned by South Korea?s Sam Tan Corp, is required to gradually divest up to 51 percent of its shares to local companies after 10 years of its commercial production as part of the mandatory divestment program stated in its coal contract of works.

In 2001, the Korean company with an annual production of about 11 million tons of coal, was required to sell 37 percent of its shares but it failed. In 2002, the company?s shares that should be sold were increased by 4 percent to 44 percent.

The divestment process was resumed this year after a number of delays. The government and Kideco?s current owner have agreed to fix the value of the company?s 100 percent shares at US$365 million.

Indonesia Power said that it would seek another coal producer to be acquired to meet its program to have its own coal mining firm. In addition, the company is also looking for coal mine concession that could produce coal between two and three million tons a year. (*)