Friday, August 25, 2006

The Fall of US$3.2 bn coal deal: Blame on The Rain!

I like Milli Vanilli's song, a sweet memory of 1980s college years. The abnormal heavy rains in Kalimantan in the second quarter had a significant effect on the collapsed of what friends previously dubbed Deal of The Year. Another heavy rains in East Java would surely put more pressure on Energi Mega of visible flood at areas currently hit by mudflow from Lapindo Brantas. But there are so many factors beyond the rains.

"What do you mean with blaming the rain," a senior journalist asked me this afternoon.
"Well, the unusual heavy rain had cost lower production output at Arutmin. But it's a spin of the facts that the price had been too high. The question, why the price was so high. I suspect there was mark-up in the price," he further said.
"And then, where is Credit Suisse? Why such a big investment bank let them fooling people around. Where's the fiduciary responsibility," he asked.
Credit Suisse promised to raise US$2.1 billion to finance the US$3.2 billion deal. "They risk their credibility in the market," another journalist said.
Well, last month I posted an article about the deal has been on the verge of collapse when investors started to realize that the US$3.2 billion price tag was too high.
I met Samin Tan, president director of PT Renaissance Capital, and he asked me whether he was crazy. "You are," I answered.
"Let's see. I'm optimistic about the deal," Tan replied.
We exchanged SMS in the last few weeks about the deal until I realized that the deal had been collapsed for reasons I'm not sure still. "I'll get back to you about the reasons," Mr Tan wrote this morning after the whole world got the news.
"There are two groups at Bumi. Those who enjoy the current situation, keep the company under the existing shareholders for particular reasons, and those who want to move on with the divestment of KPC and Arutmin," an investment banker said.
"Bakrie family seems in a hurry of something and they may not get the same 'lucrative' offer," an analyst called.
Bumi Resources is considered of committing public lies on the transaction. "By law, probably there is no violation. This is just unethical and showing the inconsistency of Bakrie Group," Edwin Sinaga, analyst at Kuo Capital said.
Bumi immediately reiterated its plan to move on the merger plan with Energi Mega Persada, but both Capital Market Supervisory Board (Bapepam) and JSX said the plan should be reviewed significantly.
Suspension of Bumi shares trading would be sustained, JSX said. But suspension on Energi shares trading could be lifted earlier.

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Anonymous Anonymous said...

Rain is the classic excuse. Look at last year performance analysis. Rain was the blame too. I agree with YA's point. Rain is not the only blame. Perhaps, Bumi's management only know one song, the Milli Vanilli's "blame it on the rain" song.

I turned into a foreign securities analysts at a bar last night. He said to me that people start talking about the character and capabilities of the management of one of the world's best and biggest coal mines company. This company is piloted by a handful of corrupt monkeys, including one Aussie monkey. After he finished his story, I said in that case he is not a monkey but a Kangaroo as, based on what this friend's description, he only drinks the best wines(and a lot of EXPENSIVE wines only), smokes ONLY the BEST and EXPENSIVE Cigars and live in the 6th-star brand new apartment in town. Monkey doesn't drink wines (especially only expensive wines) and doesn't smoke cigars (best only Kretek). A major mining contract was awarded to an Aussie contractor with unbelievable terms and rates in favor of the contractor. Needless to say, there must be major kick-back paid to this drinking and smoking last point, my friend also said, there is an English Junior Dog inside too, who would do anything the senior Kangaroo asked, and cheat and lie as he see fit. When he is fully trained, this dog can be very dangerous.

2 other monkeys are local. Driving only the best cars and Jeeps around the city. The analyst told me these people are highly incompetent and only "YES MAN!!" to the owner, licking up his butt. They too have a lot of side deals with contractors and suppliers. Owner is happy because management would do anything asked, management are also happy because they happily and freely make SIDE deals with contractors and suppliers with Owner genuinely doesn't know or pretend that he doesn't know. Indonesians like to say "SENANG SAMA SENANG".

Management are flying around the world with the latest state-of-the-art and brand new private jet, while suppliers at the mines are screaming and begging for payments to which they are entitled, and have to threaten to file for law suits or stop supplying before they get paid. YA, may be you know a song title which can best describe this irony.

Company's results are window-dressed to please investors and lenders, and when can't be covered up anymore, auditors are asked to restate so that company can resume with a clean balance sheet. Let's see what more can be done to window dress the results, now with the divestment have been cancelled. Who knows they will soon blame the Sidoarjo mud as a reason for not achieving results to please investors and lenders.

At the end of the conversation, he said his company and investors are stuck with Bumi shares. Can't even dump now as trading has been suspended. He swears he would not touch the "B" family related shares anymore.

August 26, 2006 4:46 PM  
Anonymous Anonymous said...

You know what? Based on the above, the management are the real "MILLI VANILLI".

August 26, 2006 4:49 PM  
Anonymous Anonymous said...

More news on facts behind Bumi management comes a source met at quiet Jakarta bar last night. No, this spot does not serve the IMPORTED EXPENSIVE WINES & CUBAN CIGARS loved by Ausie kangaroo and his English hound dog. Rumour is Bumi is now blaming their problems not only on rain in Kalimantan and mud in Java but is blaming it on Ausie managing director KPC who is being made kambing hitam. Next to blame will be war in Iraq, invasion of Gaza and Lebanon or bird flu!
What will international financial markets do when they hear about the spin that kelompok monyet of Bumi will put on the recent “repositioning of the KPC MD to empty Bumi desk in Jakarta, starting August 28? The official clarification to JSX and Bapepam about Bumi intentions will talk about ‘rejuvenation of management’ and Indonesianisation of the MD job, just like a letter to all Bumi business unit heads said last week. Not even kelompok monyet could believes that? The truth is that this is just like repositioning the deck chairs on the ship titanic as it is sinking.
My talkative source who was warmed up now by a bit more NON-EXPENSIVE LOCAL BINTANG BEER say that mine sources report to him that after nearly 3 years of putting up with inept corporate mismanagement by Bumi’s kelompok monyet, the MD and many other key members of the Indonesian and Ausie management team cannot any longer be quiet. They cannot any longer match their ethical business standards, knowledge of good corporate governance and best operating practices, specialy financial and contracts processes, with the decision and the instruction that they continued to receive from Bumi. The continual request for millions of dollars of outstanding payment from service contractors and for cash dealing or threats to withdraw service reached the point where it was professional embarrassment to the KPC management team. The source who needed a taxi to take him home in a depressed mind sum up the situation like this. Bumi are like corporate cowboy who believe they had won lucky draw when paying fire sale price of US$500 million for KPC from Rio Tinto and BP in 2003. They have no idea to manage their grand prize and only been successful in managing and siphoning one of Indonesia’s and world’s class coal resources and mining operations for bankruptcy! After all this, only fools and optimists think that you could win lucky draw twice quickly by asking for the greedy and overvalued sale price of US$3.2 billion. Nice try kelompok monyet but it seems PT Renaissance’s Saman Tan and his bankers are not the easy fools you think. If you had drop your sale price by a billion dollars, you might just be in right ballpark for fair sale price, and still put in your pocket huge return investment for your bad financial management.
Let see what financial markets judge the worth of Bumi if ever Bumi shares get re-instated for trading. My unhappy source said he would sell his shares immediately before they became worth less than toilet tissue.

August 29, 2006 5:42 AM  
Anonymous Anonymous said...

Yes well said and with that said, how can the government award so many other contract to Bumi B for example the contraversal USD one Billion dollar gas pipe line when they well know that all the contractors who have supported KPC and Bumi mining are in THE SHIT right now because of extremely late payments and some not at all until now....just watch the cards fall unless there is new rejuvanated confidence with a fresh new international investor holding majority....which will bring a breath of fresh air to all and spark the good working practices of old and get the show back on the road the way it should be managed and operated for what it is.

September 02, 2006 8:15 AM  

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