SOEs to form SPV to acquire Freeport shares, seek bank loans

By Thomas Sembiring

A number of state-owned enterprises (SOEs) will form a special purpose vehicle (SPV) to acquire a 10.64 percent shares in gold and copper giant PT Freeport Indonesia (PTFI) worth US$1.7 billion, and will seek large external borrowings to finance the acquisition.

The plan was revealed in a document distributed by state-controlled mining firm PT Aneka Tambang Tbk (Antam), which is expected to lead the SPV, to members of the House of Representatives Commission VII on energy and mining during a hearing session Wednesday.

According to the document, the SPV will only be able to allocate $510 million equity for the planned acquisition, with the remaining bulk of the $1.19 billion required funds to be financed via bank loans.

The loans will then be repaid from dividends to be paid by PTFI. ?If PTFI does not pay dividends, then the loans can?t be repaid,? said Antam President Director Teddy Badrujaman.

Meanwhile, Minister of Energy and Mineral Resources Sudirman Said stated that PTFI has not paid dividends in three years. He said that the dividend payment is decided by the company?s shareholders meeting, and since the government currently only have a tiny 9.36 percent shares in the company, it does not have enough vote to decide on the dividend payment. He added an additional 10.64 percent would not make much influence in the shareholders meeting.

PTFI plans to divest 10.64 percent shares to Indonesian government this year to meet its divestment obligation. The company last week offered a value of $1.7 billion for the shares to be divested, which some officials including State Minister of State Owned Enterprises Rini Soemarno considered as too expensive.

The government will form next week a special team to evaluate the PTFI share price offer. The government has until March to respond to the offer.

Minister Rini said previously that a group of SOEs including Antam, coal giant PT Bukit Asam Tbk, and aluminum giant PT Indonesia Asahan Aluminium (Inalum) to jointly acquire the 10.64 percent shares.

Meanwhile, Clementio Lamury, Executive President for Public Affairs at PTFI, told members of the House Commission VII that the $1.7 billion value assigned to the company?s 10.64 percent shares is based on size of the company?s gold and copper reserves at its mine in Papua lasting until 2041, and on the planned $15 billion investment to be made by the company through the period to develop underground mine.

The company?s current mining contract, however, will expire in 2021. It has sought for an extension of the contract until 2041, which could not be entertained by the government as current regulation stipulates that application for contract extension can only be made two years before its expiry. The government has also been facing pressure not to extend the PTFI mining contract.

Elsewhere, Antam?s Teddy said that the company has the required experience in operating underground mines in West Java, although the scale is smaller than PTFI?s underground mine project in Papua.

Editing by Reiner Simanjuntak