Bumi stake 'better bought by locals'

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Fri, 10/31/2008 9:55 AM  |  Business

The need for coal has made it important for the country to ensure security of coal supplies -- the main reason behind the government backing plans by state firms to purchase a stake in the largest coal producer PT Bumi Resources, a minister claims.

Bumi is one of the Bakrie subsidiaries whose shares are now being put on offer to help the group accelerate payments of debts backed by shares from its subsidiaries. These accelerated payments are needed to help limit a possible dilution of share values and ownership (for the whole Bakrie group) caused by the fall in share prices earlier this month.

While the purchase negotiations reportedly include global household names, State Minister for State Enterprises Sofyan Djalil said Thursday it was urgent to keep the ownership of Bumi in local hands, be it state firms or private firms, as it has big reserves of high quality coal.

"Bumi is a good asset and we need the coal stocks, so rather than foreigners taking Bumi over, why don't we the locals buy it," he said.

At present a consortium of state companies led by PT Tambang Batubara Bukit Asam (PTBA) -- a state coal producer, is still in talks with the Bakrie group to try to acquire as much as 35 percent of Bumi shareholdings.

Sofyan said the consortium, which also includes state mining companies PT Timah and PT Aneka Tambang (Antam), would involve strategic partners with stronger financial capabilities.

The Bakrie group of companies has said it will raise US$1.2 billion from the sale of shareholdings. In addition to Bumi, the group is also selling its stake in PT Energi Mega Persada (EMP).

The Bakrie group got badly burned before the market regulator suspended the trading of its shares three weeks ago, mainly because of speculation that it would default on short-term debts which were backed by the value of its subsidiaries, possibly dragging down the main share index along with it.

The government then requested state firms to team up to buy the shareholding stakes, in a move critics considered to be a way of organizing a government bailout for the group -- which is controlled by the powerful family of People's Welfare Minister Aburizal Bakrie.

The government however was quick to deny that the request was an effort by the Government to rescue the Bakrie group, saying that the consortium of state and local private firms, if successful in purchasing Bumi shares, would do that within a business-to-business framework.

Among the global firms reportedly in negotiation with Bakrie group are U.S.-based private equity firm Texas Pacific Group and India's Tata Group. Investors from China and the Middle East are also reported to have joined the negotiations.

As for the consortium of local companies, Sofyan said he had no knowledge of the exact proportion between the state firms and local private companies.

"I don't know how much is their proportion in the consortium. It really depends on the price (of Bumi) and respective financial capabilities," he said, adding that the money would be mobilized from their own cash resources without requiring the government's involvement.

Timah president director Wachid Usman said the negotiation was still underway and no significant progress has been made so far.

A top businessman, who is familiar with the negotiation but asks for anonymity, said the Bakrie group had so far secured pledges amounting to $700 million, around $500 million short of its target.

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