JAKARTA (TheInsiderStories) - The State Owned Enterprises (SOEs) will consider various financing schemes to purchase up to 51% stakes of PT Freeport Indonesia, such as bonds issue, asset securitization and others. The decision on financing scheme is pending on the results of the valuation of Freeport shares, a senior official at the SOE Ministry said.
“It will depend on the shares valuation. The SOE Minister wants (to buy) 51% shares, therefore Indonesia will have majority stakes. It (financing) can be done through issuing bonds,” Deputy Minister for Mining, Strategic Industries and Media at the Ministry for State Enterprise Fajar Harry Sampurno said.
He said the financing of the planned purchase will depend on the valuation of the shares.
When asked whether the SOE companies have the ability to purchase 51% of Freeport shares, Sampurna said, “It is really possible.” The state owned companies can buy Freeport Indonesia shares by a consortium of SOEs.
He said the government, led by the Ministry of Energy and Mineral Resources, is currently negotiating with Freeport Indonesia over the stake purchase. There are also representatives from the SOE Ministry in the negotiating team. The divestment of Freeport shares is in line with the Contract of Works (CoW) in 1991.
Sampurno said the SOE Ministry is now waiting for directions from the energy and mineral resources ministry. Once the negotiation result is achieved, the SOE companies would be ready to find funds to finance the purchase. He added the SOE ministry is currently in the process of setting up a mining holding company. “The mining holding company could leverage its assets in purchasing the (Freeport) shares. We can also seek funding from abroad through asset securitization. Thus, there should be no problem with financing scheme,” he said.
The State Owned Enterprise Ministry is currently drafting a plan to set up a mining holding company, which will be led by Inalum.
He said the establishment of the mining holding firm is still going on. The SOE ministry is now waiting for the launch of Government Regulation (PP) on the establishment of a holding company. He expects the establishment of the mining holding company to be completed by the end of first semester this year.
Currently, Freeport-McMoRanholds 90.64% shares of Freeport Indonesia and the remaining 9.36% is held by an Indonesian entity.
Based on Government Regulation No. 77, 2014, Freeport is required to divest 30% shares as the company planned to carry out underground mining. Freeport then was supposed to divest further 10.64% shares in 2015 and further 10% by 2019.
However, the recent Government Regulation (PP) No 1, 2017, has mandated Freeport to divest up to 51% shares to the government. This was one of major issues that are being contested by Freeport McMoRan. The company still insists that it was only obliged to divest up to 30% shares.
Last year, Freeport has offered the 10.64% shares to the Indonesian government for US$1.7 billion or Rp23.83 trillion, however, the talks collapsed as the government considered that the price was too expensive.
On Feb 20, Freeport McMoRan President Director Richard Adkerson said Freeport “cannot accept” the government’s decision to allow Freeport to export concentrates on condition that the company agrees to change its Contract of Works (CoW) changed into Special Mining Permit (IUPK).
Freeport said the company and the Indonesian government negotiated over the past six months to reach an investment agreement. Freeport maintains its position that exports would be allowed and the Contract would remain in effect prior to signing the investment agreement.
Meanwhile, the Energy and Mineral Resources Minister Ignasius Jonan has encouraged the negotiation team on Freeport to find the best solution both for Indonesia and Freeport. (*)