There are no regulatory hurdles for PT Freeport Indonesia to clear as it readies for its initial public offering (IPO), lawmakers and mining experts agree.
Satya W. Yudha, a Golkar lawmaker on House of Representatives Commission
VII overseeing mining, said the firm could float its shares on the
Indonesia Stock Exchange (IDX), as long as the parent company, Freeport
McMoran Copper & Gold Inc., still retained majority ownership, as
stipulated in the contract it signed with the government.
“I think Freeport can divest between 10 to 20 percent of its shares to the public,” Satya told The Jakarta Post.
Komaidi
Notonegoro, an activist from the ReforMiner Institute think tank,
agreed, adding that Freeport Indonesia was entitled to launch an IPO
under Indonesian law.
“PT Freeport actually has two options: launching an IPO or direct divestments,” Komaidi said.
An
IPO for Freeport Indonesia would be better for the public, he said, as
the firm would be required to publish quarterly and annual financial
reports as a condition of a listing on the IDX.
“An IPO would improve the transparency of the company, and thus, be a much better choice,” Komaidi added.
Separately,
Ramdani Sirait, a Freeport Indonesia spokesman, confirmed that the
company was considering an IPO. “This option is very interesting because
it helps increase the accountability and transparency of the company
and brings more direct benefits to the people of Indonesia,” Ramdani
said as quoted by Reuters on Wednesday.
Freeport Indonesia
previously said that it was offering “good faith” open discussions with
the Papua administration for a possible divestment of shares.
Freeport-McMoran
currently holds a 81.28 percent stake in its Indonesian subsidiary,
while the remainder is held by PT Indocopper Investama and the central
government, which each have a 9.36 percent stake. Indocopper is entirely
owned by Freeport.
According to Freeport-McMoran’s initial
contract with the government in the 1970s, the firm is required to
divest its stake in Freeport Indonesia to the government or to local
firms. The contract does not specify a set percentage of shares to be
divested. However, under the Freeport-McMoran’s 1991 contract with the
government, the company was required to give up a 51 percent stake in
Freeport Indonesia by Dec. 30, 2012.
The 1991 contract was
nullified by a 1994 government regulation, which effectively allowed
Freeport-McMoran to retain full ownership of the subsidiary.
The
central government recently revived initiatives to take over majority
ownership in foreign companies with resource extraction contracts, such
as planned acquisitions by state-owned mining companies such at PT Aneka
Tambang and PT Bukit Asam.
Satya said that Freeport McMoran could not entirely disregard public demand for greater Indonesian control over its subsidiary.
“The first offer should go to a state-owned enterprise, and, subsequently to a national private company,” he said.
Freeport McMoran, however, was not bound by any law to divest its stake in Freeport Indonesia, he said.
The
Bakrie family, which has a strong presence in the mining industry
through various firms, including the world’s biggest thermal coal
producer, PT Bumi Resources, is said to be interested in buying a stake
in Freeport Indonesia.
The head of the family, Aburizal “Ical” Bakrie, is chairman of the Golkar Party and has plans to run for the presidency in 2014.