Pertamina blames IMF for Karaha Bodas case<\/p>\n
Moch. N. Kurniawan, The Jakarta Post, Jakarta<\/p>\n
State oil and gas firm Pertamina accused the International
\nMonetary Fund (IMF) on Monday of washing its hands in the legal
\ndispute between Pertamina and independent power producer (IPP)
\nKaraha Bodas Co. LLC, despite its suggestion to suspend the
\nlatter's project in late 1990s.<\/p>\n
Pertamina's president Baihaki Hakim said Pertamina had
\nrecently asked the IMF to testify on the project's suspension at
\nthe New York court, which heard the dispute. But the agency
\nturned down the request.<\/p>\n
\"The IMF's rejection is unfair because it, under the
\nletter of intent (LoI), supported the government in its
\nsuspension of many IPP projects.<\/p>\n
\"Therefore, the IMF should explain the project suspension was
\nits own suggestion for coping with the economic crisis,\" he told
\nreporters after the hearing with House of Representatives
\nCommission VIII for science, technology and environmental
\naffairs.<\/p>\n
He said the IMF explanation was necessary to convince the U.S.
\njudges that the suspension of the Karaha geothermal power project
\nin Karaha Bodas, West Java, was a matter of force majeure.<\/p>\n
\"With its refusal, the IMF has indicated that its involvement
\nin the project suspension was irrelevant,\" he said. \"They
\ninsisted that the suspension was the government's decision.\"<\/p>\n
The government suspended the Karaha Bodas project, along with
\ndozens of other power plant and infrastructure projects, on Sept.
\n20, 1997, as part of retrenchment to cope with the monetary
\ncrisis that had hit the country a month before. The government
\nallowed the resumption of several projects, including the Karaha
\nBodas project, in November that year but it suspended the project
\nagain on Jan. 10, 1998.<\/p>\n
Many believed the suspension was due to pressure from the IMF,
\nwhich had first signed the LoI with the government on Oct. 31,
\n1997.<\/p>\n
The government has called on state electricity company PLN and
\nthe IPPs to renegotiate their contracts.<\/p>\n
Many IPPs reached agreement upon renegotiation. But several
\nIPPs, including Karaha Bodas, rejected the offer and took the
\ntermination of their contracts to international arbitration.<\/p>\n
In Karaha Bodas case, the company won a ruling from a
\nSwitzerland-based arbitration in late 2000, ordering Pertamina
\nand PLN to pay Karaha US$261 million in compensation.<\/p>\n
The three parties had signed a joint contract in 1994.<\/p>\n
Karaha is mainly controlled by American firms Florida Power
\nand Caithness, with local partner Sumarah Daya Bakti. Sumarah is
\nowned by Muhammad Bawazier and Lodito Purwasih.<\/p>\n
Karaha then sought confirmation of the arbitration award at
\nthe U.S court because Pertamina had assets there. It won a ruling
\nfrom a Houston Court in December 2001 to uphold the arbitration
\nruling.<\/p>\n
Afterwards, the company started a campaign to seize Pertamina
\nassets around the world, as Pertamina had refused to pay
\ncompensation.<\/p>\n
Pertamina also filed request to the Jakarta court to stop
\nKaraha's campaign to seize its assets and won an injunction in
\nlate March.<\/p>\n
But the legal dispute has not yet ended as Karaha won a U.S
\ncourt order to freeze Pertamina's Bank of America and Bank of New
\nYork accounts unless Pertamina paid the compensation.<\/p>\n
Some $200 million has been frozen at those banks, but
\nPertamina has appealed, saying the funds belonged to the
\ngovernment from the sale of liquefied natural gas.<\/p>\n
Pertamina won a U.S. court order to release 95 percent of the
\nfunds, but Karaha also appealed against the release order.<\/p>\n
Neither the government nor Karaha can withdraw the disputed
\nfunds at present.<\/p>\n
Aside from the legal fight, Pertamina has offered Karaha the
\nopportunity to recommence the project, but Karaha has refused it.<\/p>\n
The government has revoked the decree that suspended the
\nKaraha project, allowing it to proceed.<\/p>\n
Baihaki went on to say that in contrast with the IMF, the U.S.
\nSecretary of State welcomed Pertamina's request for it to offer
\nan explanation to the U.S. court.<\/p>\n
For eyebox<\/p>\n
\"On the expenditure side, following the government's announcement
\nin September of its intentions to cut spending, specific plans
\nhave been formulated to postpone or reschedule major state
\nenterprises infrastructure projects and development expenditures.
\nThese expenditure measures, which are concentrated in roads,
\ntransmigration, irrigation and energy projects, will improve the
\ncentral government budget by around 1\/2 percent of GDP. In
\naddition, savings in materials and other routines expenditures
\nwill amount to about 1\/4 percent of GDP\"<\/p>\n
LoI of Oct.31, 1997<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/pertamina-blames-imf-for-karaha-bodas-case-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }