PT KPC announces "Force Majeure"

P.T. Kaltim Prima Coal announced today that it had been forced to a new declaration of Force Majeure on sales contracts because of the blockade of its key production facilities at Sangatta, Kabupaten Kutai Timur, East Kalimantan. Less than one full cargo of coal remains at its port.

Mining operations and conveying of coal to the port have been stopped since the afternoon of 2nd August when some members of the SBSI labour union re-imposed an illegal blockade.

The blockade came when KPC refused to accept an SBSI demand that KPC withdraw disciplinary warnings that had been issued to workers for unauthorised absence and for illegal blockade causing loss. From 14th June, KPC's operations had been progressively forced to close by imposition of a blockade of key production facilities.

KPC stated that SBSI has broken commitments that it had given on four recent occasions:

(1) On 11th July before the DPR-D Commission E in Samarinda, SBSI promised to follow Regulation if KPC withdrew its termination of 66 employees. With assurance from the Bupati Kabupaten Kutai Timur and Commission E, KPC agreed to do so but insisted on the issuing of warnings.

(2) On 19th July before a special Committee chaired by the Minister for Manpower and facilitated by the Head of DPUN, SBSI Chairman Muchtar Pakpahan committed SBSI to follow Regulations and accept warnings. In exchange and as a sign of good faith, the company agreed to pay strikers 50% of their base pay for the time that they had been absent without authorisation.

(3) On 26th July before a negotiating Committee chaired by the Director of Manpower, again Chairman Muchtar Pakpahan and SBSI Committee members from KPC/Sangatta committed to respect Regulation and accept warnings that were endorsed as valid by the Department of Manpower.

(4) On 2nd August, after tripartite negotiations were over, Chairman Muchtar Pakpahan and SBSI Committee members from KPC/Sangatta committed to accept that the warnings would apply and that the assessment of validity would be made by Manpower authorities. An agreement would be signed on the following day.

KPC offers very high wages and many other valuable employee benefits. KPC already awarded a salary increase between 4 to 8% in January 2000 and could not justify any further increase. However as a sign of goodwill to resolve the current dispute, a further 3% salary increase has been offered as well as an increase for Housing Facility of Rp107,000 per month (for a Grade B operator). SBSI indicated acceptance of the offer but only if KPC withdrew the warnings. KPC is confident that the warnings are in line with Regulations. This demand by the SBSI was a fundamental breach of previous agreements and showed no recognition of the significant concessions given by KPC in the whole process.

Since the first blockade by SBSI members on 15th June, KPC has lost 33 days of production, equivalent to 1,650,000 tonnes of coal. This coal would have had a sales value of $US 45 million, of which about Rp 82 billion would have gone to the Indonesian Government in the form of Royalty and Corporate tax.

If SBSI continues its blockade of KPC's operations, KPC must consider seeking a declaration of Force Majeure under the terms of its Coal Agreement with the Indonesian Government

For further information please contact Bambang Susanto (*)