KPC shareholders reluctant to sell stake to E. Kalimantan administration

The wish of the East Kalimantan administration to own 51 percent stake of coal mining firm PT Kaltim Prima Coal may not be materialized following a statement from one of KPC shareholders, Rio Tinto, that it may not sell the stake to the administration, Koran Tempo daily reported on Thursday.

Rio Tinto president Noke Kiroyan told the daily that even if the shareholders reached an agreement with the central government over the pricing of the 51 percent stake, KPC stake would not automatically go to East Kalimantan administration.

"It depends on us to whom we will sell the stake," Kiroyan, who was accompanied by Rio Tinto external director Anang Rizkani Noor.

Kiroyan said further that even the central government could not dictate KPC shareholders on to whom they should sell the stake.

Kiroyan's statement over Rio Tinto's reluctance to sell the stake to East Kalimantan administration has surprised both executives of the provincial administration and local councilors alike.

The secretary of the East Kalimantan administration, Said Syafran, lamented Kiroyan's statement, and said that if Rio Tinto did not want to sell the 51 percent stake to local administration, it would ask the central government to revoke KPC's contract of works.

"They are just contractors. The owners of the coal are Indonesian people," Safran said.

Councilor Agus Salim supported Safran's view and suggested that the provincial administration move further to get the stake as he suspected that Rio Tinto would do whatever it could to delay or even prolong the divestment of KPC stake, as required by its contract of works.

Under the contract of works, KPC shareholders - Rio Tinto and BP Plc. -- are required to sell 51 percent stake at KPC this year to local entity, be they the central government, local administration or to Indonesian private businesses or citizens.

The East Kalimantan administration has partnered with local private company PT Intan Inti Bumi Persada to take over the 51 percent stake of KPC. Under the plan, if Intan Persada managed to purchase the stake from KPC, it has promised to grant 10 percent stake to the East Kalimantan administration. It is not clear yet as who owns Intan Persada.

This KPC stake acquisition plan has been spearheaded by East Kalimantan Governor Suwarna A.F. and supported by East Kalimantan Legislative Council Speaker Sukardi Jarwo Putro and a team of divestment set up by the administration and the council.

Nevertheless, many more East Kalimantan people, including those residing in Jakarta, opposed to such a plan, and they prefer the East Kalimantan administration itself acquires the whole 51 percent stake. The funding for the purchase could be secured from banking industry or from the central government.

Those supporting the latter plan include former East Kalimantan governor H.M. Ardans. He suggested that the East Kalimantan administration demand the central government to transfer some of the coal royalty funds, totaling 13.5 percent of all coal output, to the provincial administration. This way, the administration would have the fund to purchase the 51 percent stake of KPC. (*)