Rio, BP, KPC to meet govt Monday to negotiate share sale price: Report
Monday, July 16 2001 - 12:57 AM WIB
"I would hope we either agree on the price or move to the next stage of the negotiating process," Graefe, who is also general manager of finance at Rio Tinto Indonesia, was quoted by AFX-ASIA as saying.
Under the terms of its 30-year production-sharing contract with the Indonesian government for its coal mine in East Kalimantan, KPC must offer, but not necessarily sell, 51 pct of its shares this year.
Rio Tinto and BP's representatives on the KPC board have met with officials from the Geology and Mineral Resources Department once before this year to discuss the evaluation of the stake but so far the government has not agreed to their offer price.
Graefe would not reveal how much the joint shareholders are offering to sell the shares for but he said it is "significantly higher than the last offer price."
The offer price has increased this year to reflect a 20 percent rise in the coal price and a 150 mln usd reduction in KPC's debt over the last two years, Graesi said.
Under the contract, KPC began offering shares for sale in 1998, beginning with a 23 pct stake which has since increased each year to the current maximum offer of 51 pct since no party has ever accepted the offer price and bought the KPC shares. Under the deal, any shares not sold must be re-offered the next year.
If the government rejects the latest evaluation, two independent valuers will be tasked with negotiating a price -- one appointed by Rio Tinto and BP, and the other by the government.
If these valuers still cannot agree, the shareholders and government will jointly appoint a third independent valuer, who will work with the existing valuers to determine the final price.
The offer is open to the Indonesian government, Indonesian nationals or Indonesian companies controlled by Indonesians.
The government must approve any party who buys KPC shares under its controls over ownership of foreign-held companies.
Graefe said the divestment process has been overshadowed by a lot of misinformation and disputes with the local authorities in East Kalimantan.
"There have been a couple of initiatives taken by the government of East Kalimantan; one is its claim that KPC has not sold any shares so far which amounts to corruption and the other is its claim that we have manipulated production data," he said.
He said the East Kalimantan government is confused over the contractual commencement date of production and the date production actually started.
Under KPC's contract with the central government, it agreed to start divesting shares five years after the commencement date of production, calculated according to when its production rate reached 70 pct of design capacity. According to KPC, this date is Jan 1, 1992.
However, East Kalimantan claims the company actually started production some five years earlier -- a point Graesi conceded but added that the company had not reached the required production levels as stated under its contract.
"There was coal production before that (1992) and some of it was sold but we paid our royalties and tax and declared all that," he said.
In addition, Graefe is one of five KPC employees targeted by the regional government, which reported them to the local police and accused them of corruption because KPC had not yet sold any shares.
Graesi said as far as he knows, police have decided not to act on the authority's complaint.
"We sent a letter about the corruption claims to the central government to say this is a commercial matter and these people shouldn't be arrested for acting on behalf of KPC," he said.
Graefe said the East Kalimantan government is also claiming sole entitlement over the KPC stake since the mine is in its jurisdiction.
However, under the contract the regional government has no such claim over the shares, he said.
Rio Tinto and BP announced in May they had abandoned their proposal to offer just 44 pct of KPC shares this year, rather than the maximum 51 pct, because they wanted to end the debate with the government and move forward. (*)