Court annuls arbitration ruling against PLN

Court annuls arbitration ruling against PLN

JAKARTA (JP): The Central Jakarta District Court annulled on
Thursday an arbitration ruling that ordered state-owned
electricity company PT Perusahaan Listrik Negara (PLN) to pay
US$572.3 million in damages for breach of contracts to two units
of American energy company MidAmerican Energy Holdings Co.

The panel of judges said the ruling made by the United
Nations-supervised arbitration panel last May was "legally
defect". They said MidAmerican's units -- Himpurna California
Energy Ltd. and Patuha Power Ltd. -- had not consulted with state
oil and gas company Pertamina on the arbitration lawsuit filed by
both companies against PLN and the Indonesian government.

The judges said under the joint operation contract (JOC)
signed by Pertamina and Himpurna and Patuha, the state company
held the title to geothermal exploration and production
facilities used by both companies.

"The defendants (Himpurna and Patuha) are only contractors of
Pertamina. They only have utilization rights over the
facilities," senior judge Endang Sumarsih said.

"However, the arbitration panel stated in its ruling that the
facilities are owned by Himpurna and Patuha, which is in conflict
with Pertamina's contracts with both companies," she said in the
provisional ruling on the lawsuit filed by Pertamina against both
companies.

Himpurna and Patuha have developed geothermal power plants in
respectively the Dieng area in Central Java and in the Patuha
area in West Java.

The companies signed the JOC with Pertamina to allow them to
develop geothermal resources in both areas.

With Pertamina, both companies later signed an energy sales
contract with PLN, under which PLN would buy power from both
companies through Pertamina.

However, due to financial difficulties, PLN refused to pay
Himpurna for its power supplies, despite a take-or-pay clause.

The government put Patuha's power project on hold last year
amid the economic crisis.

PLN, which recorded Rp 9 trillion in losses last year, is
experiencing financial difficulties following the sharp
depreciation of the rupiah against the dollar in mid-1997. The
company sells power in rupiah but buys power from independent
power producers (IPP), including Himpurna and Patuha, in U.S.
dollars.

Himpurna and Patuha won arbitration lawsuits against PLN and
the government.

The arbitration panel ordered PLN to pay both companies to pay
$572.3 million in damages.

PLN filed a lawsuit at the Central Jakarta District Court to
annul the arbitration ruling.

In a move of apparent support for PLN, Pertamina also sued
Himpurna and Patuha at the court for breach of contracts.

Sources said MidAmerican was set to file another arbitration
suit to force the Ministry of Finance to cover damages payable by
PLN.

However, the panel of judges ordered Himpurna and Patuha to
postpone their intention "to execute the arbitration's decision
on the damages and file further arbitration litigation", until
the court made a definitive ruling on the case.

"The defendants are liable to pay the plaintiff (Pertamina) $1
million per day in penalties if they act against these rulings,"
Endang said.

MidAmerican's team of lawyers from the Hanafiah and Ponggawa
law firm filed an appeal against the panel's ruling.

One of MidAmerican's lawyers, Joni Aries Bangun, voiced
concerns over what he said was "an indication that the judges
were not objective in examining the case".

Endang said the trial would resume next Thursday to provide
opportunities for MidAmerican's lawyers to counter the court's
temporary decision. During the trial, the lawyers are expected to
deliver arguments stating the court has no right to examine the
case.

"If the panel of judges accept their arguments, the trial of
the case will continue at the Jakarta High Court.

"If the panel of judges dismiss their arguments, the Central
Jakarta Court will continue examining the case," Endang said.
(jsk)