Coal venture Bumi expects to retain business in Indonesia

London-listed Bumi Plc., which controls a stake in two of Indonesia's major coal producers, expects to retain its grip on assets in the country despite the planned exit of its Indonesian shareholder.

Bumi group head of corporate affairs and investor relations Nick von Schirnding said that the company would maintain its interest in creating "Indonesian coal champion".

"We'll get through these few bumps on the road in a few weeks. The thing is if the Bakries swap their shares and exit Bumi, we do have local partners here, in particular in the form of Borneo [PT Borneo Lumbung Energi & Metal] and Samin Tan," Von Schirnding told reporters in a limited interview yesterday.

Bumi is currently 47.8 per cent owned equally by the Bakrie Group and hard-coking coal producer Borneo, which was founded by local tycoon Tan, who currently serves as Bumi Plc.’s chairman.

The Bakrie Group, which is controlled by the family of the presidential candidate of the Golkar Party, Aburizal Bakrie, recently submitted an offer to Bumi to exchange its 23.8 per cent stake in Bumi for shares in the company's subsidiary, Jakarta-listed PT Bumi Resources. The group has also proposed making a cash payment to purchase Bumi's remaining stake in Bumi Resources and all 84.7 per cent of its stake in another subsidiary, PT Berau Coal Energy.

Bumi will be only a cash shell if the proposal is fully approved.

Borneo president director Alexander Ramlie has said that his company would maintain its ownership in Bumi despite the Bakries' exit.

"We will have to cooperate with other shareholders [in Bumi] if the Bakries' proposal is approved. We will see later, whether cash obtained from the transaction will be returned to shareholders or used to buy new assets as they will be inexpensive due to the weakening [coal] market," Ramlie said recently.

The Bakries' proposal has been under review by Bumi's financial advisor, the Rothschild Group.

"The valuation [by the Rothschild Group of the Bakries' proposal] is almost done," Amir Sambodo, Bumi's independent non-executive director, said.

The Bakries apparently want to complete the share swap and transaction in Bumi Resources before Christmas. However, the goal is "technically feasible but very unlikely", Von Schirnding said, pointing out that Bumi's board still needed to recommend the proposal and seek approval in an extraordinary meeting while the London Stock Exchange will be closed from December 21.

More time may also be necessary for Bumi's board to issue a recommendation on the Bakries' proposal as it has stated that it would not make any recommendation unless it had received the results of an investigation into Bumi Resources and Berau for potential financial irregularities.

Bumi announced last month that it had commenced an independent investigation, conducted by law firm Macfarlanes, to probe alleged misuse of development funds and developments assets in its two subsidiaries.

Amir said that the investigative committee had started the verification and carried out several interviews with Bumi Resources and Berau as well as Indonesian authorities at the Capital Market and Financial Services Supervisory Agency.

Meanwhile, Bumi. founder Nathaniel Rothschild, who holds about 10 per cent in the company and previously resigned from his position as a non-executive director, has also submitted a letter to the company's independent non-executive directors. The British financier has asked that his letter, which is said to be about an alternative to the Bakries' proposal, remain confidential.