Local govt eyes KPC shares

The East Kalimantan provincial administration has received strong backing from local legislators in its efforts to acquire part of PT Kaltim Prima Coal?s shares, the country?s major coal producer based in the province, The Jakarta Post reported on Monday.

The provincial legislative council issued a decree last week supporting the local government?s plan to acquire 4.08 percent of KPC shares.

?The council?s support is very important to the local administration in order that its plan to buy part of KPC?s shares materializes,? E. Kalimantan provincial administration spokesman Jauhar Effendi was quoted by Antara as saying Friday.

The news agency, however, did not mention whether the local administration had approached PT Bumi Resources, the current owner of the coal mining company.

Bumi announced recently that it had secured an agreement to sell its entire stake in KPC, and another two coal mining companies, Arutmin Indonesia and IndoCoal Resources, to a consortium of local and foreign companies led by PT Borneo Lumbung for US$3.2 billion.

The East Kalimantan administration has intended to acquire part of KPC?s shares since the time the company was owned by Rio Tinto and British Petroleum in the late 1990s.

BP and Rio Tinto at the time were required to sell their 51 percent stake to Indonesian entities to meet mandatory divestment requirements under the government?s mining laws.

But, the divestment process did not go well due to differences in interpretations between KPC and the local government involving prices and the percentage of the divested shares.

The negotiations over the divestment were bogged down for several years until PT Bumi Resources bought a 100 percent stake in KPC for US$500 million.

KPC, located in Sanggata in East Kutai, is the country?s largest coal producer with a capacity of 50 million tons a year. (*)