JAKARTA. After PT Freeport Indonesia announced to convert the status of contract of work to special mining license (IUPK), the government through Minister of Energy and Mineral Resources (ESDM) will arrange the scheme for the divestment of this US-based mining company. In accordance with the Government Regulation No 1/2017 on Mineral and Coal Business, Freeport has to divest 51% of its shares gradually.
In the first phase, the investment involved as much as 20% of Freeport stakes. To date, Indonesia controls 9.36% of Freeport stakes. Thus, to complete the divestment of 20% of stakes, the government eyes for the divestment of 10.64% of stakes.
According to Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan, President Joko Widodo has instructed to divert the 10.64% of stakes to state controlled pension funds.
To date, there are major state owned employer pension funds, such as Dapen Telkom (Telkom Pension Funds), Dapen Pertamina (Pertamina Pension Funds), and BPJS Ketenagakerjaan (Workers Social Security Agency). According to Financial Service Authority (FSA or OJK), the total assets of employer pension funds as of November 2016 reached Rp 172 trillion.
In referring to the Government Regulation No 1/2017, the price of the divested stakes will be determined by the market mechanism.
The government and Freeport apparently will have though negotiations on the price of the divested stakes.
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.
But for Jonan, the price can be negotiated later. The most important thing is that Freeport will comply with the requirement of divesting 51% of stakes. The previous regulation only required an underground mining to divest as much as 30% of its stakes. “Now, all mining have to divest 51% of their stakes in 10 years,” Jonan stressed.
The regulation stipulates, the Freeport stakes would be divested to Indonesian companies, either to state owned enterprise (SOE or BUMN), local owned enterprise (LOE), or private company. The divestment will not go through stock exchange.
The Spokesman of Freeport Indonesia Riza Pratama said that Freeport is still reviewing the policy on divesting 51% of stakes.
President Director of Pension Funds of Bank Rakyat Indonesia (BRI) Mudjiharno M Sudjono said that the bank will assess the business feasibility of Freeport’s divestment.
(Muhammad Farid/Translator)
