Indonesia’s largest coal mine, PT Kaltim Prima Coal (KPC), owned by PT Bumi Resources and TATA India, has been associated with human rights abuses and massive environmental contamination, according to a new report released today by JATAM, Indonesia’s Mining Advocacy Network.
 
The report exposes the massive environmental and social liabilities incurred by Bumi’s biggest asset, the KPC coal mine, just as the company goes into selective default as a result of failure to make scheduled payments to its bondholders [1]. The embattled company now faces a dual threat of unpaid social and environmental liabilities coupled with a major default as a result of outstanding debts to its creditors, which include Credit Suisse, Deutsche Bank, the China Development Bank and China Investment Corporation.
 
“The KPC coal mine is contaminating several major rivers in East Kalimantan and destroying the livelihoods of thousands of indigenous Dayak peoples. People have been provided with no compensation from the government or the company. They now face increased flooding, have lost land and other resources, and are forced to buy water. In East Kalimantan, coal is not only a dirty form of energy that damages our climate, but it is also deadly, killing people and biodiversity,” said Merah Johansyah of JATAM East Kalimantan, one of the report’s authors.
 
The KPC mine is located in the Indonesian province of East Kalimantan and produces 50 million tonnes of coal per annum, making it one of the world’s largest coal mines. JATAM conducted a field visit to KPC’s project sites in June 2014, visiting three affected villages and the Sangatta township.
 
The report documents the following impacts:

Share prices of Bumi Resources, the financially troubled holding company of KPC, have plummeted 71% over the past year. Swiss bank Credit Suisse, along with China Investment Corporation and the China Development Bank, have been heavily involved in bankrolling the corporation. JPMorgan Chase and Deutsche Bank have also acted as underwriters for Bumi Resources, despite the company’s poor financial performance. The company is frantically trying to renegotiate bond repayments with investors, and has negotiated a complicated debt-equity swap with the Chinese sovereign wealth fund CIC to avoid defaulting on its debt.

“We call on all banks, financiers and shareholders of Bumi Resources to use their influence with this company and their subsidiaries to bring an end to the problems of KPC. If this does not happen immediately, they should cancel their loans and commit to issue no more loans or purchase no more shares or bonds in Bumi Resources or any company associated with it and take steps toward public divestment from these companies,” said Arif Fiyanto, Climate and Energy Campaigner with Greenpeace Southeast Asia.

The report may be downloaded at english.jatam.org.

[1] http://www.bloomberg.com/news/2014-08-11/bumi-makes-second-attempt-to-avert-375-million-bond-default.html