Bumi Plc, the coal company at the center of dispute between co-founders Nathaniel Rothschild and Indonesia’s Bakrie family, said it hasn’t uncovered a “black hole” in a probe of contractors at its largest unit.
“We’ve not discovered any black hole or any significant issue that we are concerned about, and we’ve completed quite a lot of work,” Chief Executive Officer Nick Von Schirnding said yesterday in an interview, referring to an investigation at its PT Berau Coal Energy. The review has forced Bumi to delay releasing 2012 earnings. “We are doing extensive forensic work into potential undisclosed liabilities, and that is more difficult.”
Bumi shares plunged 69 percent last year in London amid an investigation that started in September into “alleged financial irregularities.” At the same time, Bumi is working to separate from its other Indonesian coal affiliate PT Bumi Resources, controlled by the Bakries, in a deal valued at more than $580 million at the time it was announced. That transaction remains on schedule for June completion, Von Schirnding said.
“I’m determined to emerge from this with a clean set of numbers and assets that everybody can have full confidence in,” he said from London where the company yesterday requested a halt in trading of its stock. “It is very frustrating, I am very angry that we have to suspend these shares temporarily.”
Bumi gained 7.8 percent to close at 259.3 pence on April 19. The stock has declined 5.6 percent this year, giving the company a market value of 625 million pounds ($956 million).
The coal producer said April 12 it had been unable to verify some spending at Jakarta-based Berau. Four days later Bumi Chief Financial Officer Scott Merrillees said he would resign in June. Berau’s management team is overseeing a full audit review and is verifying contracts signed by the Indonesian company, Bumi said yesterday. It owns 85 percent of Berau.
Rothschild, who departed from the board last year and in February failed to win investor support to return as a director, yesterday repeated demands for Merrillees, Chairman Samin Tan and director Alex Ramlie to step down immediately.
“Given their board and management roles at Berau, as well as their symbiotic links to Bakrie, it is simply not credible to suggest that they are somehow victims of this train wreck like real minority shareholders,” Rothschild said yesterday in e-mailed comments. The three are “blatantly conflicted,” he said.
Rothschild said in a later phone interview that he had called at Bumi board meetings as early as December 2011 for action to be taken over events at Berau. The response to his criticism had been “slow” and “lethargic,” he said.
Berau management decided there was “not sufficient evidence to support the capitalization of certain expenditures” estimated at about $56 million last year, Bumi said earlier this month. Berau had also been unable to fully verify about $38 million in land payments.
It may take as long as 10 days to complete the probe, which is being handled by internal management as well as Ernst & Young and Berau auditors PriceWaterhouseCoopers, Von Schirnding said. About 60 people are working on the probe, which hasn’t uncovered any evidence of corruption, he added.
“That is clearly what we are trying to bottom out and clarify,” Von Schirnding said. “I want to emerge from this with a set of accounts and practices etcetera that we can all be absolutely comfortable with and in line with best corporate governance practices. We need to be able to complete this exercise for me to be able to give you that assurance.”
The review isn’t expected to have any impact on operations and Berau’s mines “continue to perform in line with expectations,” Bumi said yesterday.
The proposed separation from the Bakrie Group and Bumi Resources, where Bumi holds a 29 percent stake, is “on track” and Von Schirnding said he was meeting a Bakrie representative yesterday for further talks. He has previously sought assurances that the Bakries will be able to fund the transaction.
“Obviously, that is a key issue and one that I’ve always raised in every single one of our meetings,” he said. “They have given me the assurance that the monies will be there. We will be pushing on that repeatedly.”
The sale agreement is “virtually there,” Von Schirnding said.