BoA freezes Pertamina assets

BoA freezes Pertamina assets

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Independent power producer Karaha Bodas Co. LLC said Bank of
America (BoA) had frozen more than US$130 million in funds
belonging to the state-owned oil and gas firm Pertamina under a
U.S. court order.

Karaha legal counsel Christopher Dugan said the move was by
the power company's efforts to collect $261 million in unpaid
compensation from Pertamina.

"As Pertamina continues to defy the courts, we (Karaha)
announced that BoA has frozen more than $130 million of
Pertamina's funds," Dugan said in statement available to The
Jakarta Post on Wednesday.

Karaha entered into a contract in 1994 with Pertamina and
state electricity company PLN to develop a $1 billion power
project in Karaha, West Java.

But the 400-megawatt power project was suspended by the
government, along with several other power projects, following
the 1997 financial crisis.

Unable to proceed, Karaha, which has invested $100 million
prior to the suspension, filed a lawsuit against the government,
Pertamina and PLN with a Switzerland-based arbitration.

Karaha won the arbitration ruling in December 2000, which
order Pertamina and state electricity company PLN to pay $261
million to Karaha, plus 4 percent interest per year, starting
January 2001.

Last December, Karaha won a confirmation from U.S. Federal
Court in Houston, which issued the verdict to uphold the ruling
of the arbitration tribunal.

But instead of paying the compensation, Pertamina filed a law
suit at the Central Jakarta District Court to annul the
international arbitration ruling.

This has prompted Karaha to launch a campaign to freeze
Pertamina's assets worldwide to satisfy the compensation award.

However, Dugan said Karaha would only target Pertamina's
assets, not the assets that belong to Pertamina's production
sharing partners.

Dugan then said, at present, courts in Singapore and Hongkong,
like the U.S. court in Texas, had also entered judgment against
Pertamina, ordering Pertamina to pay the $261 million
compensation.

He added that Karaha would also vigorously oppose Pertamina's
legal action at the local court, saying the Pertamina move would
only harm Indonesia's image in the eyes of international
investors.

With the move, Pertamina was sending a message to foreign
investors that Indonesian state-owned enterprises could breach or
terminate their contracts at will and with impunity, and that it
didn't care what foreign courts rule, he said.

"This attitude will seriously damage the investment climate in
Indonesia," Dugan said.

Pertamina officials and its legal counsel were not available
to comment.

But according to a source close to Pertamina, the funds Karaha
had restrained at BoA in New York belong to the government of
Indonesia, not Pertamina.

"The restraint is temporary, pending further review and
analysis by a judge. It is wrong for these funds to be held up,"
the source told the Post.

Pertamina and the government had made extensive submissions in
court to show that the funds should be released, the source
added.

The source said Pertamina would also continue its Jakarta
court appeal to annul the arbitration ruling, arguing the ruling
could be canceled by local court as stipulated in the contract.

Meanwhile, the government has allowed Karaha to resume the
power project and several others to avoid power crisis in the
future.

Last week, President Megawati Soekarnoputri issued decree No
15/2002 on the revocation of decree No. 39/1997 which suspended
many mega projects.

Minister of energy and mineral resources followed it up by
issuing decree No 216/2002, allowing the Karaha Bodas project
development to be restarted.

Karaha has reportedly refused the offer.

Karaha is controlled by American giant Florida Power and New
York-based Caithness.