PTBA will go ahead with its plan to buy KPC shares

State owned coal producer PT Tambang Batubara Bukit Asam (PTBA) will go ahead with its plan to take over the 20 percent of the East Kalimantan-based coal producer PT Kaltim Prima Coal although many government?s officials have doubted its ability to settle the deal, Suara Karya reported on Saturday.

PTBA?s president Ismet Harmaini said in Jakarta on Friday that the company was still interested in buying the shares. "We are still studying a number of alternatives to settle the deal. Issuing bonds might be the best alternative for us," he was quoted as saying.

The company?s financial director Abdul Aziz Nazori shared Ismet?s optimism. He said that other alternatives included bank loans or rights issue. "Special for banks loans, we face no difficulties because many banks including Bank Mandiri have expressed their readiness to support the financing for the share purchase," he added.

Ismet said that PTBA was still preparing for a due diligence audit to ensure a fair transaction. "We need at least two months for the due diligence audit.

A number of government officials have doubted PTBA?s financial ability to settle the deal. They had also appealed the company to cancel the deal.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said that he had agreed in principal on the plan to extend the deadline of Bukit Asam to settle the purchase of 20 percent of KPC shares for another two or three months from January 31. The total value of KPC shares are worth US$822 million, meaning that the price of the 20 percent share that will be purchased by PTBA is 20 percent of the total value.

According to the existing framework agreement, if the appointed buyers fail to meet the Janaury 31 deadline in settling their purchases of KPC?s shares, KPC is allowed to offer the shares to other Indonesian buyers after consultation with the government.

KPC, which operates a large coal mining area in East Kalimantan, is equally owned by world mining giants Rio Tinto and BP. Under its contracts of works, the company?s shareholders are required to divest 51 percent of their shares to local investors.

The mandatory divestment program has been delayed for at least three years due to a dispute over the percentage of the shares that must be sold to the central and local government. The local administration had demanded to buy the entire 51 percent stake.

According to the latest compromise, 31 percent of the 51 percent of KPC shares would be sold to the provincial administration and another 20 percent to the central government. The later then appointed the 20 percent of KPC shares to PTBA. (*)