Minister of Energy faces lawsuit over KPC divestment

The provincial administration of East Kalimantan has filed a legal suit against Minister of Energy and Mineral Resources and Chairman of Investment Coordinating Board (BKPM) with the Jakarta state administrative court for allowing PT Bumi Resources, the majority shareholder of Kaltim Prima Coal (KPC) to sell 18.6 percent of its stake in the East Kalimantan-based mining company to the authority of the Kutai Timur Regency.

In its legal suit, the East Kalimantan authority through its solely owned company PT Perusahaan Daerah Melati Bhakti Investama (PDMBI) charged the minister and BKPM chairman of violating the divestment program of the coal company.

In October, 2002, the government agreed to a proposal to sell 31 percent of KPC shares to East Kalimantan provincial government and another 20 percent of state owned coal company PT Batubara Bukit Asam as part of the mandatory divestment program that required KPC shareholders to divest up to 51 percent of their shares to local shareholders.

The problem occurred after Bumi Resources acquired the entire stake of KPC from previous shareholders Rio Tinto and BP in July 2003. The new shareholder broke the initial agreement and sold KPC's 18.6 percent to the authority of Kutai Timur, one of the regencies in East Kalimantan. (*)