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JAKARTA. Coal miner PT Borneo Lumbung Energi & Metal (BORN) said that it was focusing on ways to recoup its original investment worth US$1 billion after the Bakrie Group proposed to dissolve two joint ventures holding a total of 46.7 percent of London-listed Bumi Plc.
In a letter submitted to the Indonesia Stock Exchange, BORN announced that it had started bilateral negotiations with the group, which comprises PT Bakrie & Brothers and Long Haul Holdings Ltd, both controlled by the Bakrie family.
“BORN and the Bakrie Group have started negotiations to reach deals about the dissolution of the joint ventures, in which one of the deals will be about the recovery of the amount originally invested,” BORN president director Alexander Ramlie said in a written statement.
BORN and the Bakrie Group agreed last year to establish two joint ventures, Borneo Bumi Energi & Metal Pte Ltd and Bumi Borneo Resources Pte Ltd, to operate as special purpose vehicles with stakes in Bumi Plc. The formation of the two joint ventures followed BORN’s purchase of 23.8 percent, or half of the stake in Bumi Plc previously held by Bakrie Group, in a deal worth $1 billion.
BORN made the investment using loans from Standard Chartered Bank, which later raised concerns after learning the investment plunged in value as the board was rattled by rifts between key shareholders, particularly the Bakrie Group and British financier Nathaniel Rothschild, who was recently forced to step down from the Bumi Plc board.
Reuters reported on Wednesday that a top Standard Chartered banker involved in making the $1 billion loan to BORN had quit after the bank struggled to get other lenders on board. The $1 billion investment is now worth around $230 million, based on Bumi Plc share price movements.
The dissolution of Borneo Bumi and Bumi Borneo would be a consequence of the Bakrie Group’s proposed share swap involving its 23.8 percent stake in Bumi Plc for a 10.3 percent stake in PT Bumi Resources. Bumi Plc now owns a 29.2 percent stake in Bumi Resources.
The Bakrie Group also proposes to purchase the remaining 18.9 percent stake Bumi Plc holds in Bumi Resources for approximately $278.3 million in cash before Dec. 25.
Moreover, Bakrie Group is planning to purchase the entire 84.7 percent stake Bumi Plc holds in another coal producer, PT Berau Coal Energy, reportedly for $947 million by June 30, 2013.
Given BORN’s statement to seek a full return of its investment, the Bakrie Group proposal may be approved, including the sale of Berau.
In an announcement published on Bumi Plc’s website on Wednesday evening Jakarta time, the decision on the Bakrie Group’s proposal will depend on the result of an investigation into alleged financial irregularities in Bumi Resources.
“The board will not make any recommendations regarding the propsals until the investigation is appropriately advanced,” Bumi Plc said in the announcement.
The investigation was commissioned late last month and was said to focus on alleged irregularities related to $537 million of Bumi Resources’ development funds and $75 million in assets held by Berau.
Julian Horn-Smith, senior independent director of Bumi said the company had appointed the Rothschild Group as the financial adviser to evaluate each of the proposals.
“Our objective is to ensure all shareholders are treated fairly and we will update the market as soon as practicable,” Smith said.
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