Legal issues clouding Adaro up for Bapepam-LK review

Novia D. Rulistia ,  The Jakarta Post ,  Jakarta   |  Wed, 06/04/2008 10:14 AM  |  Business

The planned initial public offering (IPO) of PT Adaro Energy, set to become the country's largest IPO by value, could hit a snag as the stock market watchdog looks at legal problems.

Head of the Capital Market Supervisory Agency and Financial Institution (Bapepam-LK) Fuad Rahmany said Tuesday his offfice was taking independent advice on Adaro's legal problems and would decide soon whether they would affect the IPO plans.

"We are studying the legal case of Adaro as their problems in relation to disputes between parties are very complex," he said. Bapepam could not give the date yet for the company to conduct its IPO.

Bapepam's head of the companies' finance evaluation bureau, Nurhaida, said the evaluation process was expected to be finalized this week.

The company was allegedly involved last year in transfer pricing when it sold coal to a Singaporean unit at a below-market price to avoid paying higher taxes, leading to an investigation.

The investigation was later dropped by the Attorney General's Office due to a lack of evidence, but some House of Representatives members have publicly called on the stock market authority not to grant permission for Adaro to go ahead with its IPO plan.

Fuad said his institution would remain neutral and would not be dragged into the political debate.

Adaro is also involved in a dispute with the Beckett Group involving ongoing legal questions.

Adaro Energy, the holding company of PT Adaro Indonesia, the country's second-largest coal miner, plans to price its stocks in the IPO at between Rp 1,050 (11 U.S. cents) and Rp 1,125 per share.

The IPO would result in at least Rp 12 trillion in proceeds, making it the country's largest-ever IPO.

Under its plan, the company would put 11,139 billion shares, or about 34 percent of Adaro's total shares, on sale from June 24 to 26. The company is expected to officially list its shares on the Indonesia Stock Exchange on July 2.

Adaro sets its revenue target this year at Rp 16 trillion with a targeted net profit of Rp 1.5 trillion.

Last year, the company's revenue rose to Rp 11.5 trillion from Rp 9.7 trillion the previous year. Its net profit dropped to Rp 133 billion in 2007 from Rp 141 billion in 2006.

Company data shows that Adaro is 36 percent owned by foreign investors including Goldman Sachs, Citigroup, Farallon Capital, the Government of Singapore Investment Corporation and the Kuok Group.

Teddy P. Rachmat, one of Indonesia's wealthiest businessmen, and Saratoga Capital, each own 32 percent.

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