Jakarta decision on KPC divestment is final

Secretary General of Energy and Mineral Resources Djoko Darmono has said that the option given to East Kalimantan provincial administration to buy only 31 percent of the 51 percent shares to be divested by PT Kaltim Prima Coal is final.

The decision that was made during a Cabinet meeting led by President Megawati Soekarnoputri recently could not be changed, Djoko said as reported by Kompas on Saturday. During the meeting, the East Kalimantan provincial administration was given the rights to buy 31 percent of KPC?s 51 percent shares and the central government another 20 percent.

Djoko acknowledged that certain parties in the province still opposed the decision and continued to demand to buy all the coal company?s 51 percent stake. But according to Djoko, the ministry has yet received any formal explanation from the East Kalimantan governor about the refusal.

The ministry insists that as East Kalimantan is part of the Indonesian Republic, it should abide by the central government?s policy. But the provincial administration says that the central government?s rejection to allow East Kalimantan to buy KPC?s 51 percent stake is irrational.

"The central government will not suffer any loses even if all of the 51 percent stake that will be divested by KPC fall into the provincial administration?s hands," said the secretary of East Kalimantan administration Syaiful Teteng.

Sayful, like Djoko, refused to hold another negotiation. "Let?s see the people?s reaction if East Kalimantan is not given the rights to buy all of KPC?s 51 percent stake," Sayful said.

KPC, which operates a large coal mining area in East Kalimantan, is equally owned by world mining giants Rio Tinto and BP. Under contracts of works awarded by the ministry of energy and mineral resources, the company?s shareholders are required to divest 51 percent of their shares to local investors.

The divestment has been delayed for several times. The latest deadline for the divestment was initially set at June 31 but the legal suit filed by the provincial administration against the company?s shareholders has caused a delay in the divestment process. The local government sued the company?s shareholders and the Ministry of Energy and Mineral Resources for prohibiting it from buying the 51 percent of KPC shares that would be divested. The court, on the request of the provincial administration, seized KPC?s shares posing another problem in the divestment program.

The provincial administration of East Kalimantan last week had dropped the legal suit against KPC to pave the way from the resumption of the delayed bidding process. (*)