Vallar poised to raise Bumi Resources stake - April 6 - Financial Times

By Anthony Deutsch in Jakarta, Christopher Thompson and William MacNamara in London

Published: April 6 2011 23:18 | Last updated: April 6 2011 23:18

Vallar is moving ahead with plans to expand its stake in Indonesia’s biggest coal company, as its metamorphosis into a sizeable miner gathers momentum.

The London-listed cash shell founded by financier Nat Rothschild stands to gain an indirect controlling stake in Kaltim Prima Coal mine – the world’s largest thermal coal mine – by increasing its shareholding in Bumi Resources, which operates the mine, to 51 per cent later next month.

Bumi Resources, the coal miner owned by Indonesia’s Bakrie family, has a majority stake in KPC, according to the company’s website, while India’s Tata holds 30 per cent.

Andrew Beckham, chief financial officer of both Bumi Resources and Vallar, said he expected the Bakries to approve a plan to increase Vallar’s 25 per cent stake in Bumi Resources via a share swap expected in May. However, in an e-mail, he hinted at uncertainty as to how the transaction would occur.

“Whether this is through the Bakries swapping more shares [if they have any] or through other shareholders or a combination of both has not been decided as yet,” Mr Beckham wrote.

Vallar was created in July by Mr Rothschild, who raised an initial £707m ($1.2bn) from investors. In November, he agreed to pay a combined $3bn for 75 per cent of Berau Coal Energy, the fifth-biggest producer in Indonesia owned by local tycoon Rosan Roeslani, and 25 per cent of Bumi Resources, the country’s largest coal producer.

This year Vallar said it would rename itself Bumi plc and said Bumi shares would start trading in London on May 10.

The KPC mine located on the coal-rich island of Kalimantan, is the jewel of the Bakrie business empire. It also forms the centrepiece of Vallar’s intention to produce 140m tonnes of mostly Asia-bound coal from its assets by 2014 – making it one of the biggest thermal coal companies in the world. Earlier this year, Indonesia’s Environment Ministry placed the KPC mine on an environmental watch list after a review of the operation in 2010 showed problems with treatment of waste water.

The Bakrie Group, a family holding company, is in the process of increasing its stake in Vallar from 43 per cent to 54.6 per cent according to a recent company statement. However, the Bakries’ voting shares in Vallar will remain fixed at 29.9 per cent.

In a recently published financial statement for 2010, the Bakrie family holding company said it will use its entire Vallar stake as collateral on a $602m loan from Credit Suisse, due on March 2, 2012.