Freeport has to settle divestment this year

January 21, 2017, 01.11 PM  | Reporter: Pratama Guitarra
Freeport has to settle divestment this year


JAKARTA. Ministry of Energy and Mineral Resources (ESDM) requires Freeport McMoran to divest 41.64% of PT Freeport Indonesia’s stakes in this year. The government wants the divestment will be settled this year so that Indonesia can control 51% of Freeport shares in this year.

The divestment refers to the Government Regulation No 1/2017 on Mineral and Coal Business (Minerba). To date, Indonesia has controlled 9.36% of Freeport shares. Hence, Freeport has to release 41.64% more of its stakes.

Article 97 paragraph 7 Government Regulation No 1/2017 stipulates that a mining company is subject to offer shares divestment as much as 51% in five years after production period. Vice Minister of ESDM Arcandra Tahar said that Freeport has been producing in more than 10 years so that the divestment has to be settled this year.

He said that Ministry of ESDM will release ministerial regulation related to the divestment. The provisions of the divestment will consider market mechanism.
Arcandra stated, the government will call major state owned pension funds to buy Freeport’s shares, as President Joko Widodo’s instruction.

Aside of pension funds, holding of mining state owned enterprises has also prepared strategy to take over all Freeport’s mining in 2021 after the contract’s termination. “The establishment of the holding will strengthen the capital structure,” said President Director of PT Indonesia Asahan Alumunium (Inalum) Winardi Sunoto.

Inalum will likely be appointed as mining SOEs’ holding, which will supervise four mining SOEs, namely Inalum, PT Aneka Tambang (Antam), PT Bukit Asam (PTBA), and PT Timah Tbk. The holding will obtain as much as Rp 100 trillion capital from those four companies.

Freeport estimates, the 10.64% of stakes worth US$ 1.7 billion, while the 100% of stakes until 2041 worth US$ 15.9 billion. Based on the estimation, the price of 51% of stakes will be US$ 8.1 billion of around Rp 110 trillion.

However, the government estimates that 100% of Freeport stakes worth US$ 5.9 billion. Therefore, the 10.64% of stakes worth US$ 630 million, while the 51% of stakes worth US$ 3 billion or Rp 40.7 trillion.

The spokesman of Freeport Indonesia Riza Pratama said, Freeport is still evaluating the Government Regulation No 1/2017, including the requirement of divestment. “Previously, an underground mining only requires divesting 30% of the stakes. Our team is still evaluating this new policy,” he said.

(Muhammad Farid/Translator)

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