KPC divestment to go ahead despite change of share ownership

Coal mining company PT Kaltim Prima Coal (KPC) has to carry out its obligation of selling 51 percent of the company shares although mining company Rio Tinto and energy giant BP Plc have sold all their share ownership to local mining company PT Bumi Resources.

Wimpie S. Tjetjep, director general of mining and mineral resources at the Ministry of Mining and Mineral Resources asserted the change of share ownership will not rule out the obligation on divestment of 51 percent KPC's shares.

"The shares was KPC's main shares. Thus, it did not change the structure of KPC as a company nor the obligations they must carry on," Wimpie told Suara Pembaruan late Tuesday.

However, Wimpie admintted the obligation can be in question given the fact that KPC is fully owned by Indonesian business.

Anglo-Australian firm Rio Tinto and Anglo-American firm BP Plc, who jointly owned all stakes in KPC had agreed to sell all their shares to local coal mining company PT Bumi Resources for US$500 million.

The decision ends years of legal battle between the two companies and the East Kalimantan provincial administration who host the coal mining site, over who will control the mining firm.

Under its 30-year contract, KPC was supposed to hand over the 51 percent stake, which is worth $453 million, by the end of 2001. But the process had been facing a stalemate for years due to a legal battle with the East Kalimantan provincial administration, which wants to get its hands on the stake

Meanwhile, the government said it will summon both Rio Tinto and BP Plc to explain the "sudden" sale of their entire stakes in Indonesia's Second largest coal miner, PT Kaltim Prima Coal (KPC)

"We will summon Rio Tinto and BP to explain why they suddenly decided to sell their stakes in KPC," Laksamana Sukardi, State Minister for State Enterprises, told reporters on Tuesday.

However, Laksamana stopped short at providing details on when the meeting would take place.

Eddie J. Soebari, Bumi Resources's director said the company will focus on closing the deal with Rio Tinto and BP Plc before embark on the divestment of the 51 percent stake.

"We will discuss the divestment after the transaction complete," Eddie said.

Eddie added Bumi Resources will use corporate internal funds and alternative financing resources to pay for the $500 million take over of KPC's full shares.

"We work on to get $500 million before the deadline to close the transaction in October," he said.

Both Rio Tinto and BP Plc asserted that the decision is a pure business one and was not taken under social and political pressure which had entailed the divestment process.

"It is purely a business deal. And it is by far the best one available," Anang Rizkani Noor, Rio Tinto's deputy director for external relations, told TheJakarta Post.

Satya W. Yudha of BP Plc said the selling of its 50 percent ownership in KPC will give more room for the company to focus on its oil and gas business.

Anang added that Bumi Resources had been selected as the company had been the only one to show serious interest in buying KPC, and had a wealth of expertise in the coal mining field.

Meanwhile, Bumi Resources deems the take over of KPC's share ownership will strengthen its energy business. Bumi Resources have so far acquire a number of companies in energy sector among other PT Arutmin from coal mining company BHP.

"It is in line with corporate decision to change the core business to energy sector," Eddie said. (*)