Court overturns KPPU tanker sale ruling

Court overturns KPPU tanker sale ruling

Leony Aurora, The Jakarta Post, Jakarta

The Central Jakarta District Court overturned a ruling of the
Business Competition Supervisory Commission (KPPU) over state oil
firm PT Pertamina's tanker sale, saying it found no elements of
unhealthy competition in the deal.

Responding to the verdict favoring the plaintiffs --
Pertamina, the deal's financial advisor Goldman Sachs Pte.,
tender winner Frontline Shipping Ltd. and its local agent PT
Equinox -- KPPU's lawyers said that they would appeal to the
Supreme Court within 14 days.

The panel of judges said on Wednesday that Frontline, which
offered US$178 million for the two Very Large Crude Carriers
(VLCCs), scored higher than its competitor Essar Shipping Ltd.,
despite the latter's $183 million bid.

"Essar could not provide a 20 percent down payment on time, as
was shown by a letter from its guarantor the State Bank of
India," said the judge.

Bermuda-based Frontline later raised its bid through Equinox
to $183.5 million and was announced as tender winner.

The court opined that due to the limited time -- Pertamina was
concerned that the assets could be seized at any time as a result
of its dispute with Karaha Bodas Company (KBC) -- Goldman Sachs
did not have to ask for a third bid from the other shortlisted
candidates, Essar and Overseas Shipholding Group (OSG).

"Essar could not fulfill the requirements and OSG had always
bid lower than the others in the earlier biddings," the court
said.

It further said that the state did not suffer losses from the
sale as Pertamina built the two tankers for $130.8 million,
despite reports that the tankers were worth well over $200
million.

KPPU's lawyer David Tobing stuck to the view that the deal was
riddled with irregularities.

"The tender winner was announced on June 10 (last year)," he
said. Pertamina meanwhile obtained an approval for the VLCC sale
from the State Minister of State Enterprises, which represented
the government as the shareholder, only on June 11, he added.

"Pertamina sent a letter to the Minister of Finance in July
requesting an approval for the tanker plan," said Tobing, showing
a copy of the letter.

"The deal was closed a month before (the letter), but the
procedures for approval were conducted afterwards."

Amir Syamsuddin, one of the plaintiffs' lawyers, said that the
case reflected KPPU's lack of understanding of business
competition.

The court's decision annulled the financial and legal
consequences of KPPU's ruling, which was issued in early March.

At the time, KPPU ordered Pertamina's board of directors and
commissioners to explain the case to its shareholders. Goldman
Sachs, Frontline and Equinox were required to pay Rp 19.7 billion
($2.08 million), Rp 25 billion and Rp 16.6 billion in fines,
respectively.

Goldman and Frontline were also ordered to pay Rp 60 billion
and Rp 120 billion, respectively, to recoup lost potential
revenue.

The district court also ordered the KPPU to pay court costs
amounting to Rp 14.5 million.