Bumi Says $201 Million Missing After Review of Berau Finances

Bumi Says $201 Million Missing After Review of Berau Finances

Bumi Plc (BUMI), the coal producer at the center of an ownership dispute between its founders, said a review of spending at one of its two Indonesian units found $201 million of outlays with “no clear business purpose.”

In addition to the $152 million determined to be missing from PT Berau Coal Energy’s finances in 2012, $49 million was identified for the 2011, Bumi said in a statement. The Berau Coal review delayed Bumi’s results by more than two months. It today reported a net loss of $2.3 billion for 2012, compared with the year-earlier loss of $337 million after booking charges of $2.2 billion on its Indonesian coal businesses.

Bumi has been at the center of a battle for control between co-founders Nathaniel Rothschild and Indonesia’s Bakrie family since the $3 billion deal that brought them together started to sour in late 2011. Trading in the stock will remain suspended while the company “continues to enhance its internal systems and controls,” it said today.

Bumi took an impairment charge of $815 million on the Berau assets. PT Bumi Resources, in which Bumi Plc holds a 29 percent stake, posted a net loss of $666.2 million for 2012 as lower coal prices hurt sales at Indonesia’s biggest coal producer. Bumi took a non-cash charge of $1.4 billion on the value of its equity stake in Bumi Resources, it said today.Bumi holds an 85 percent stake in Berau Coal, Indonesia’s fifth-biggest coal producer, and said last month it hadn’t uncovered any “black hole” during a probe of the unit.

Roads, Construction

Bumi shares, which plunged 69 percent last year gained 7.8 percent to 259.3 pence on April 19 giving the company a market value of 625 million pounds ($952 million).

Bumi said April 12 it had been unable to verify some spending at Berau Coal. Four days later 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 on April 22.

The unaccounted for spending at Berau included $79 million attributed to roads and construction, $42 million to land related payments and $5 million of goodwill, London-based Bumi said today. A further $24 million of consulting costs were reclassified to other exceptional costs, it said.

“Indonesian legal advisers have been instructed by the company to provide a full report to the Litigation Committee on all options available to PT Berau to seek recourse and take appropriate action against wrongdoers,” Bumi said today. “The company is also engaged in discussions to attempt to recover what the board considers to have been inappropriate expenditure.”

Banking Dynasty

Chief Executive Officer Nick von Schirnding said in an April 22 interview that as many as 60 people including auditors from PriceWaterhouseCoopers and Ernst & Young were working on the Berau probe, which he expected would take as long as 10 days to complete.

Bumi is also working to separate from Bumi Resources, which is controlled by the Bakries.

The creation of Bumi brought together Rothschild, scion of a centuries-old British banking dynasty, and the Bakries, a family-owned palm oil-to-property empire founded in Sumatra in 1942. Waning coal prices, board infighting and probes in London and Indonesia including an investigation by Macfarlanes LLP into alleged financial irregularities have weighed on the stock.

The Bakries have proposed exchanging their 23.8 percent of Bumi Plc for 29.2 percent of Bumi Resources in a cash and share swap deal, leaving Bumi Plc in control of Berau Coal. Bumi’s annual general meeting of shareholders is planned for June 26 where investors could vote on the separation.

Von Schirnding has previously sought assurances from the Bakries that they will be able to fund the cash component of their offer and said he’ll be enforcing the terms of the original October proposal, which included a $278 million cash component.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net