Govt seeks out-of-court deal for KBC's claim
The Jakarta Post, Jakarta
The government is seeking to reduce a US$299 million claim made by Karaha Bodas Co. (KBC) against state oil and gas firm PT Pertamina over a canceled geothermal power project through an out-of-court settlement, a senior government official said.
The government will also file an appeal with the State Supreme Court of New York, asking the court not to freeze US$256 million of its funds in Pertamina's accounts in U.S. banks.
"We will undertake such efforts because the funds belong to the government, not Pertamina," said State Minister of State Enterprises Sugiharto on Friday.
"We will pursue with the action before the Nov. 22 deadline for the case."
KBC was one of 27 independent power producers whose projects were terminated by the government -- as recommended by the International Monetary Fund -- following the 1997 economic crisis.
KBC is owned by U.S. firms Caithness Energy LLC and Florida Power and Light Co., and local firm PT Sumirah Daya Sakti.
A Swiss arbitration court ruled in 2000 that Pertamina must pay damages to KBC for the termination of the project.
In August 2002, a U.S. district court froze $285 million of Pertamina's funds deposited in Bank of America and Bank of New York. Pertamina owns $29 million, while the rest belongs to the Indonesian government.
Pertamina tried to challenge the ruling in the U.S., Canadian, Hong Kong and Singaporean courts, but failed when the U.S. court in a final ruling on Oct. 4, rejected Pertamina's bid to nullify the arbitration award to KBC.
Sugiharto said that the government was sure of the possibility of a claim cutback through an out-of-court settlement, because there were indications of a "conflict of interest" in the power project.
"From experience of similar arbitration cases, claims can be cut if such conflicts or criminal indications are found in a case," he said, adding that the government will therefore try to find new evidence to settle out of court and the appeal.
It had recently asked the police to check for impropriety in the awarding of the contract by Pertamina to KBC. The police have so far questioned 24 people from Pertamina and KBC, and charged three suspects for alleged fictitious transactions and markups worth US$19 million in the construction of the power project.
Several critics have also urged the government not to allow Pertamina to pay the claim due to the fact that the project was given to KBC without going through a proper tender process.
Earlier this week, a number of non-governmental organizations reported Minister of Energy and Mineral Resources Purnomo Yusgiantoro to the Corruption Eradication Commission (KPK) over alleged involvement in the markup of the Karaha Bodas power project. Purnomo has denied any wrongdoing.