Pertamina refuses to pay damages to KBC, alleging corruption<\/p>\n
Fitri Wulandari, The Jakarta Post, Jakarta<\/p>\n
The newly appointed state oil and gas firm PT Pertamina
\npresident Widya Purnama said on Wednesday the company would not
\npay damages to U.S.-based energy firm Karaha Bodas Company (KBC)
\nas ruled by an international court, because of alleged corruption
\nin KBC's local power project.<\/p>\n
\"Pertamina will not pay ... because the project has inflicted
\nlosses to the state and to the company,\" Widya briefed the press.<\/p>\n
The International Arbitration Court in Geneva ruled that
\nPertamina must pay damages of US$299 million, including accrued
\ninterest, to KBC after the government suspended the company's
\npower project in the wake of the late 1990s financial crisis.<\/p>\n
However, Widya said there was evidence of corruption in KBC's
\npower project, as indicated in a 1999 report from the Development
\nFinance Comptroller, which showed a mark-up of $19.16 million in
\nthe project's investment cost.<\/p>\n
An independent appraisal also showed the project was worth
\nonly $50 million, while the KBC claimed it had invested $110
\nmillion, Widya said.<\/p>\n
Pertamina has been mired in a lengthy dispute with KBC, one of
\n27 independent power producers (IPPs) whose projects were
\nterminated by the government as recommended by the International
\nMonetary Fund.<\/p>\n
The KBC, which held a contract for a joint geothermal energy
\nproject with Pertamina, filed a lawsuit at the arbitration court.<\/p>\n
The court ruled in 2000 that Pertamina must pay damages to KBC
\nfor the termination of the project.<\/p>\n
Pertamina challenged the ruling at U.S., Canadian, Hong Kong
\nand Singaporean courts in a fruitless litigation bid.<\/p>\n
Early this year, a U.S. court rejected Pertamina's appeal
\nagainst the arbitration court's ruling.<\/p>\n
Widya said the company expected the police to speed up
\ninvestigations into the alleged graft in the project.<\/p>\n
The police have questioned several officials from Pertamina
\nand the KBC with respect to the awarding of the contract, and
\nhave charged three suspects thus far for fictitious transactions
\nand mark-ups.<\/p>\n
\"If the investigation uncovers corruption in the project, it
\nwill serve as new evidence in the appeal to the U.S. Supreme
\nCourt to annul the (arbitration court's) ruling,\" Widya said.<\/p>\n
Meanwhile, Coordinating Minister for the Economy Dorodjatun
\nKuntjoro-Jakti said Pertamina should not pay damages while the
\ngraft investigation was ongoing.<\/p>\n
Widya said Pertamina had hired international auditor Ernst and
\nYoung to carry out an investigative audit on all its ventures,
\nincluding the KBC project.<\/p>\n
KBC is owned by Caithness Energy of Florida and Power & Light
\nCo., both U.S. firms, and local firm PT Sumirah Daya Sakti.<\/p>",
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