Director of mineral and coal at ministry of energy and mineral resources has on April 23, 2015 sent a formal letter to owners of PT Berau Coal, which signs coal contract of coal (PKP2B) with Indonesian government, to immediately divest 51% shares in the Company to Indonesian participants.
Media quoted the letter saying change of PT Berau Coal into a foreign investment company (PMA) violates its CCOW because majority ownership should be in the hands of Indonesian national participants.
Bambang Tjahjono, director at the ministry, said PT Berau Coal should be returned to a domestic investment company (PMDN) because the Company has been producing coal more than 10 years.
“We are just aware of the change of its status (from PMDN to PMA) because we only supervise PT Berau Coal. After the Company entering the stock market, ownership at the parent level changed,” he said Wednesday (May 6).
Mr Tjahjono warned Berau Coal that failure to change its ownership to at least 51% owned by Indonesian participant would trigger the government to declare a default of Article 26 of CCOW. A declaration of default could lead to a one-year production suspension.
Really?
This is ridiculous because ownership changed six years ago when PT Bukit Mutiara (controlled by Bakrie and Recapital) acquired shares in PT Berau Coal from PT Armadian Tritunggal. Ramadian is 99.99% owned by PT Berau Coal Energy (BRAU) Tbk, an Indonesian company listed on IDX.
BRAU was initially controlled by Bukit Mutiara (Indonesian participants), but in 2011, as we all know, Bukit Mutiara indirectly sold its shares in BRAU to Bumi Plc in exchange of Bakrie/Bukit Mutiara’s ownership in Bumi Plc (now Asia Resource Minerals Plc), which is listed on London Stock Exchange.
We all know after the transaction that Bakrie and Recapital controlled majority shareholding in Bumi Plc. Later on, as we all know, Bakrie Group left Bumi Plc through a transaction with Samin Tan (Indonesian). Samin then became the largest shareholder in Bumi Plc (and then ARMS) with 46.7% shares. Samin controlled the shares through IDX-listed PT Borneo (BORN) Tbk and an offshore vehicle. Recently Samin Tan lost control over ARMS because half of his ownership was seized by offshore bank Raiffeisen AG.
So, if Bumi Plc or ARMS is considered foreign investor, the government should have blocked Bakrie and Samin Tan’s manoeuvres in the first place. The government ignored the changes either because they were afraid of the Bakries or probably they were not aware of the changes.
That’s why it is normal to believe that the letter was sent out by energy ministry in the context of recent battles between Nathaniel Rothschild/SUEK and Sinarmas Group in acquiring majority control over ARMS Plc. The letter implicitly closed the doors to Rothschild/SUEK because they’re foreign investors.
In fact, we have speculated on this in our earlier articles.
But, if we follow the government’s way of dealing with the issue, they should also scrutinising changes at Kaltim Prima Coal, Arutmin Indonesia, etc. We all know that these companies apply almost similar structure of ownership with PT Berau Coal, but has been there for a decade now. If you check ownership of Bumi Resources (BUMI), by definition, this company is in fact a foreign-owned company. And because BUMI divests shares in KPC to settle debts from China Investment Corp (CIC), after previously selling 30% shares to Indian company Tata Power, KPC has already violated the CCOW, right?
One should also raise question surrounding BUMI’s agreement to settle portion of its debts to China Investment Corporation (CIC) with its shares in Bumi Resources Minerals (BRMS), which should potentially lead to indirect ownership of CIC in PT Newmont Nusa Tenggara (NNT). This should also be deemed a violation of Contract of Work (COW) of NNT, right?
Once again, while we do understand the current context of the letter, the government should not give bad signals to market players about what they really mean with ‘Indonesian participant’ in the CCOW or COW. Whether Indonesian incorporated company (PT) as shareholder in CCOW or COW falls into the definition of ‘foreign investment company’ if the PT is owned by foreign company? Take for example the case of Indo Tambangraya Megah (ITMG) Tbk, which is majority controlled by Thailand-based Banpu Plc. ITMG controls CCOWs/IUPs like Indominco, Trubaindo Coal Mining, Kitadin, and Bharinto with 100% ownership. Should Indominco, Trubaindo, Kitadin, and Bharinto be divested up to 51% because at the moment Banpu Plc controlling 65% shares in ITMG and indirectly the subsidiaries?
DISCLAIMER: NO POSITION IN STOCKS MENTIONED IN THIS ARTICLE
