KPC divestment plant delayed for another three months

The divestment plan of Bumi Resources' stake in the East Kalimantan-based coal producer PT Kaltim Prima Coal (KPC) will be delayed for another three months after the government rejected the proposed price of the coal company's shares, Suara Karya reported on Tuesday.

Director General of Geology and Mineral Resources of the Ministry of Energy and Mineral Resources Simon F. Sembiring acknowledged on Monday that the divestment plan proposed by Bumi Resources would be delayed for another three months.

"The government did not agree with the share price proposed by Bumi Resources, and this would result in the delay in the divestment for another three months," he was quoted as saying.

He said that within the next three months, the government and the management of Bumi Resources would hold a negotiation to try to find out the solution of the price difference. Sembiring acknowledged that the price gap occurred because the difference of references used by both his office and the management in determining the value of the KPC's assets.

In the divestment plan proposed in July, Bumi Resources set the value of KPC's total shares at US$1.978 billion. This had caused controversy because the proposed price more than doubled than those made by former shareholders Rio Tinto and BP, which set the price of the KPC's total shares at US$822 million.

Bumi Resources took over the whole stake of KPC from Rio Tinto and BP in 2001 for US$500 million, much lower than the level of the price initially proposed by the two former shareholders.

According to regulation, foreign investors operating a mining company are required to divest up to 51 percent of their shares to local shareholders after 10 years of commercial production. Bumi Resources, although locally established company, has pledged to continue the divestment plan. (*)