KPC?s divestment program will face a rough ride: Analyst

The new plan to sell shares in East Kalimantan-based coal mining giant PT Kaltim Prima Coal (KPC) may be difficult to implement as investors might not be interested to purchase less than 51 percent shares, according to a mining analyst from Perhapi (association of Indonesian mining experts).

Mining analyst Juangga Mangasi was quoted by Investor Indonesia newspaper in its Saturday edition as saying that for some investors, it would only make business sense to invest in KPC if they could get a controlling stake in the company.

?Generally, foreign financial institutions are ready to provide funds to a company to take a majority stake in another company, so that it will be prospective from the business point of view. I feel local companies will face problems in getting foreign funds and at the end they will not be interested in buying KPC shares. Therefore, there is a least possibility for the realization of divestment,? Juangga said.

He was commenting to a new KPC divestment plan announced by a government official on Friday. The government and the new owner of KPC have in principle agreed to sell a 32.4 percent shares in the company starting this month. The share offering will last until March, said Simon Sembiring, director general of geology and mineral resources said. The government and the KPC owner are currently still negotiating the price for the KPC shares.

The publicly-listed PT Bumi Resources last year acquired a 100 percent stake in KPC, after former shareholders Rio Tinto and BP decided to abandon their interest in the coal miner following protracted dispute over a divestment obligation of their shares in the coal miner which operates in East Kalimantan's East Kutai regency.

Bumi is required to divest up to 51 percent stake in KPC to local investors. Some 18.6 percent shares had been allocated to East Kutai Regency administration.

The government, which for years had been facilitating the divestment process, has favored the East Kalimantan provincial administration and state-owned coal miner PT Tambang Batubara Bukit Asam. In fact, the government has also recommended that Bukit Asam, East Kalimantan provincial government, and the East Kutai administration to form a consortium to hold the KPC controlling stake.

But East Kutai seems to reject the government plan. Regent Mahyudin even said earlier this week, that his administration was considering to sell back a 13.6 percent stake in KPC to a unit of Bumi Resources at a price equal to the purchasing price of the 18.6 percent stake, which means that the regency administration would still have a 5 percent stake in KPC at a free cost.

?The total number of shares offered (to East Kutai) is just a good will gesture from Bumi Resources, as a shareholder of KPC," Juangga said.

He didn?t deny that there might be a possibility of deliberateness between Bumi and East Kutai regency administration in this divestment process.

?I think it (deliberateness) might be there, however, it will be alright if it is beneficial to both the parties. For Bumi, it was better to give 5 percent rather than losing 51 percent, where as on the part of East Kutai, it received 5 percent stake in KPC at free of cost,? Juangga added.(*)