Papua rejects scheme with Inalum
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The Papua administration has rejected a scheme proposed by state mining holding company Inalum that offers mining company PT Indocopper Investama (PTH) as a joint venture (JV) to hold the administrations 10 percent shares in PT Freeport Indonesia (PTFI) in the future, claiming that it deviates from the initial agreement.
The Papua administration insisted that the province Would hold the stakes in a new regionally owned company (BUMD), as agreedpreviously, rather than through PTH. PTH, a local subsidiary of United States mining giant Freeport McMoRan (FCX), currently holds 9.36 percent of PTFI’s shares. PTH is part of the Freeport divestment deal and Inalum is to purchase allvof the company’s shares for US$ 350 million.
Mining experts told The Jakarta Post on Sunday that the reaction from Papua was “normal”, considering that the future BUMD as requested by Papua would be key to ensuring the benefits of Freeport’s operations Would go to Papuans. Ahmad Redi, an expert on natural resources law with Tarumanagara University, said the concerns of the Papuan administrationgmight be coming from the historic actions of PTII itself as a company that sold its shares in PTFI back and forth.
“It [the history of PTH] has clearly become a concern for [the Papuan administration] as PTII was once a part of Freeport,” he said, “especially if We look at a transaction of shares in 1991, when Freeport sold 9.36 percent of its shares to Indocopper lnvestama and ayear later the latter again sold some of its shares to Freeport.”
Meanwhile, Gadjah Mada University mining expert Fahmy Radhi said on Sunday that a win-win solution would be having a new local state-owned enterprise (SOE) as the holder of the 10 percent of PTFI’s shares, rather than using PTII as a special purpose vehicle. The conflict became public last week when Papua Governor Lukas Enembe met with Inalum and left the meeting in anger because of the latter’s proposal.
“The proposal from Inalum was a measure ‘to fool’ us,” he said as quoted by the Papua province’s website. “We submitted our own choice of local SOE to become the holder of the 10 percent to the finance minister [Sri Mulyani lndrawati] some time ago, but then PTII came as the designated BUMD.”
However, Inaliun spokesperson Rendi Witular told the Post on Sunday that Papua’s SOE still existed, saying that the future company and Inalum would jointly hold 100 percent ofthe PTII shares.
“PTII will later hold 25 percent of PTFI shares after the divestment deal is completed,” he said.
According to data from Inalum, the final ownership structure of PTFI’s shares after the divestment deal will consist of Inalum, PTII and FCX with the three owning 26.23 percent, 25 percent and 48.76 percent, respectively. In the structure, PTlI’s shares would be owned by Inalum and Papua’s SOE with 60 percent and 40 percent, respectively. The 40 percent of the shares of the Papuan SOE in PTII are considered to be equivalent to the 10 percent share of PTFI.
Furthermore, Rendi said that the decision to use PTII was for the benefit of Papua province as it would omit unnecessary legal and administration hassles and reduce costs coming from new taxes.
“Holding 25 percent of PTII shares frees them from' dividend taxes, which would be imposed on any entity that has less than 25 percent of shares,” he said.
Indonesia, through Inalum, is expected in December to become the majority owner of PTFI, the operator of world’s second-biggest copper mine, Grasberg, in Papua, by increasing its current shares from only 9.36 to 51.23 percent. The deal would cost Inalum $3.85 billion.
Jakarta Post, Page-13, Monday, Nov 26, 2018
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