The BPK's findings on environmental could hamper the divestment of Freeport shares

FREEPORT - JAKARTA. The Supreme Audit Agency (BPK) mentioned the existence of ecosystem services that were lost due to the mining operations of PT Freeport Indonesia (PTFI), with a value of Rp 185 trillion. Reports from BPK regarding this environment can be a barrier to the divestment process of 51% of PTFI's shares.

In addition to the existence of lost ecosystem services as a result of the disposal of tailing mining operations, PTFI is also suspected of using protected forest areas, where companies from the United States do not have a Forest Area Use Permit (IPPKH). )

The protected forest area used by PTFI reached 4,535.93 hectares (ha) and caused a loss of potential Non-Tax State Revenues (PNBP) worth Rp 33.85 billion.

This surprising finding came when the PTFI share divestment process to PT Indonesia Asahan Aluminum (Inalum) only awaited payment of US $ 3.85 billion.

Responding to BPK's findings, PTFI's Corporate Communication Vice President Riza Pratama claimed PTFI had run the company's management in accordance with applicable regulations. Riza believes that her company has conducted tailings management in accordance with the Environmental Impact Assessment (AMDAL) and periodically reports to relevant government agencies such as the Ministry of Energy and Mineral Resources and the Ministry of Environment and Forestry (KLHK).

"PTFI also periodically conducts internal and external environmental audits by independent auditors," Riza said when contacted by Kontan.co.id on Saturday (10/20).

Previously, PTFI Executive Director Tony Wenas explained, PTFI had received eight recommendations from the BPK. They are the settlement of royalty payments, depreciation of Block B mining areas, placing reclamation guarantees, offering divestments to the government, measures to improve ecosystems, Borrowing Permits to Use Forest Areas, permits for use of forest areas, and evaluation of AMDAL permits.

Tony claims that six of the recommendations have been completed. While the rest is in the settlement process, which is related to the Environmental Evaluation Document (DELH) and the other is about IPPKH.

Tony said, PTFI had fulfilled this requirement a few years ago, but there was a demand for change and Freeport had returned it in September 2017. "There should be no problem because it is like that," he admitted.

Currently, according to Riza Pratama, PTFI is waiting for the completion of the two remaining recommendations from KLHK. "Regarding DELH and IPPKH we are waiting for approval," he said.

Furthermore, Riza explained that regarding environmental management, especially regarding tailings, PTFI and KLHK were preparing road maps. Riza said that the roadmap must be completed and submitted by the end of November 2018. But Riza was reluctant to open her mouth about the extent to which the road map had been completed. "I cannot provide details (preparation for construction). PTFI was asked to submit a tailings management roadmap before the end of November," he said.

On the other hand, LHK Minister Siti Nurbaya said that the road management and tailings roadmap had reached 80%. "It's being processed, there is a roadmap, again it's finished, it's 80%," he said when met by the media at the Coordinating Ministry for Economic Affairs, Friday (10/19).

In order for this divestment process to be completed, solving this environmental problem is a very important factor. Inalum President Director Budi Gunadi Sadikin did not deny the possibility that this environmental problem could be an obstacle to funding to complete the divestment of 51% of PTFI's shares.

He said, if this environmental problem is not resolved, the syndication of eight foreign banks will not want to provide loans.

"All banks if they give credit must look at environmental issues. They can only make payments after the environmental problem ends." "It is impossible for money to come out if this problem has not been completed," Budi said.

Moreover, continued Budi, to complete the divestment, the IUPK must first leave. Whereas environmental problems must be resolved, because in the IUPK there is a clause that requires environmental obligations to be settled.

Riza Pratama said that to get an IUPK, PTFI only had to solve this environmental problem. "To get the IUPK, as far as I know, it's only an environmental problem," he said.

Budi stressed, all of these obligations must be completed before December, considering that it is targeting the divestment transaction to be completed before the end of this year.