Minister Sabarno to persuade E. Kalimantan to drop legal suit against KPC

Minister of Home Affairs Hari Sabarno has been given a special task of persuading the East Kalimantan provincial administration to drop its legal suit against coal mining giant PT Kaltim Prima Coal (KPC), a government spokesman said on Thursday.

The legal suit against the East Kalimantan-based KPC has to be withdrawn before end-June, the deadline for the firm to divest 51 percent of its shares to Indonesian investors, TA Nurwinakun of the Ministry of Energy and Mineral Resources told Petromindo.com.

?The share divestment can be conducted only after East Kalimantan?s legal battle against KPC has been resolved,? Nurwinakun said.

The inter-ministerial team in charge of KPC share divestment resumed its meeting on Thursday. It asked Sabarno to induce the East Kalimantan administration to drop the indictment it had handed down last year against KPC in the South Jakarta district court.

East Kalimantan, which strongly insists that it become the preferred bidder for the 51 percent stake in KPC, accused the company of colluding with the central government to block the province from purchasing the shares. The province accordingly sued KPC in the South Jakarta court for US$776 million in compensation of divestment delay.

The divestment program had been supposed to be completed before the end of 2001, but the government delayed it into March 2002. Again, the program was delayed to end-June allegedly due to differences over the share price between KPC and East Kalimantan.

Meanwhile, KPC?s shareholders Rio Tinto and BP Plc, insist they could divest KPC shares only after its legal fight against East Kalimantan has been resolved.

KPC operates coalmines in Sangatta in East Kutai Disrict, East Kalimantan. It is required under its contract to divest 51 percent of its shares to Indonesian partners after 10 years of commercial operation, which started in 1992.

The government and KPC?s shareholders in March valued the entire KPC operation at $822 million.

However, whether East Kalimantan will be willing to withdraw its legal suit against KPC has yet to be seen.

East Kutai regent Awang Faroek said on Wednesday they did not care about Tuesday?s statements by Minister of Energy and Mineral Resources Purnomo Yusgiantoro that East Kalimantan would not be allowed to become the preferred bidder for KPC shares. Purnomo said the government would soon conduct due diligence on all investors --state enterprises, private companies and the East Kalimantan administration -- who had expressed interest to buy KPC shares.

Awang said the central government had initially shown its support to East Kalimantan having preferential rights to purchase KPC shares. (Godang)