Bumi scraps $2.3b deal to sell coal companies

Bumi scraps $2.3b deal to sell coal companies

Saturday, August 26th 2006

PT Bumi Resources, Indonesia’s biggest coal exporter, has canceled a US$3.2 billion deal to sell its two coal mining units to a consortium of local companies led by PT Renaissance Capital following a prolonged delay in the closing of the transaction.

Bumi’s finance director Eddie Soebari told The Jakarta Post on Friday that his company was forced to cancel the deal after seeing no clear sign as to when the consortium would be able to finalize the deal.

“We have not seen any positive progress since the agreement was signed in March. That’s why we have decided to cancel it, as we don’t want this kind of situation to affect our company,” he said in a telephone interview.

Renaissance, run by former Deloitte Touche Tohmatsu partner Samin Tan, agreed on March 17 to buy Bumi’s two coal mining units, PT Kaltim Prima Coal and PT Arutmin Indonesia, both of which operate in East Kalimantan.

Renaissance agreed to pay Bumi US$3.2 billion for 95 percent of Kaltim Prima Coal and 100 percent of Arutmin.

Bumi had already extended the deadline for the closing of the sales twice the signing of the agreement.

Soebari said the consortium had, however, been given the option to buy up to 25 percent of Bumi’s shares in the two mining companies, despite the cancellation.

Bumi, which is controlled by the family of Coordinating Minister for the People’s Welfare Aburizal Bakrie, said earlier that the company would merge with the another company run by the family, Energy Mega Pesada, to create one of Indonesia’s largest energy-based companies after the divestment of its coal units.

The company said that a larger part of the proceeds from the divestment would be injected into the merged company, which would expand into biofuel production. The money would be used to pay dividends to the existing shareholders and to repay the company’s debts.

Soebari said Bumi would go ahead with the merger plan but acknowledged that the company would have to raise at least US$800 million in loans to repay the debts due to the scrapping of the deal with Renaissance.

Without the sale, Bumi will have less money to invest in a planned merger with Energi Mega Persada, Indonesia’s second-largest publicly traded oil company.

Energi Mega, which indirectly owns part of the Lapindo gas field in East Java, has to bear a larger part of the costs that might arise because of the mud flow caused by faulty exploration well in the gas field.

The accident may cost Energi Mega about US$50 million, or 56 percent of its forecast pretax profit this year, PT Danareksa Sekuritas analyst Bonny Setiawan told Bloomberg.

Energi Mega’s subsidiary Lapindo owns half of the field, while Medco Energi has a 32 percent stake and Australia’s Santos Ltd. owns the remaining 18 percent.

© of The Jakarta Post

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