Karaha refuses to resume project

Karaha refuses to resume project

Moch. N. Kurniawan, The Jakarta Post, Jakarta

An independent power producer Karaha Bodas Co. LLC said on Friday
it had rejected an offer from state-owned oil and gas company
Pertamina to restart its geothermal power project in Karaha
Bodas, West Java.

Chris Dugan from Karaha's law firm of Jones, Day, Reavis &
Pogue said the company was not interested in continuing the
project that had become a center of dispute between both
companies.

"Restarting the project is economically impossible.

"It will not make Karaha whole for the damage that it has
already suffered while investing in Indonesia," he told the
Jakarta Post.

Dugan said the company was only interested in Pertamina
keeping its word to obey the international arbiter's ruling which
ordered Pertamina to pay US$261 million in compensation to Karaha
for the suspension of its power project in 1998.

It was the government which actually ordered the suspension,
according to Pertamina.

"Pertamina has promised to pay the award, and it should honor
its promise and keep its word," Dugan reiterated.

Separately, Pertamina finance director Ainun Naim said
Pertamina's offer to Karaha was still open despite the rejection.

"The project was temporarily suspended due to the unexpected
economic crisis.

"As the suspension is only temporary, we plan to continue
the project. We're waiting for the government's approval and we
will give Karaha priority to restart the project," he told the
Post.

Ainun added that Pertamina would also continue its appeal to
an Indonesian court in its fight against the arbitration ruling.
That appeal was filed earlier this month.

Karaha entered into contracts with Pertamina and state
electricity company PLN in 1994 to develop a geothermal power
plant in Karaha Bodas.

It had invested US$100 million until the Indonesian government
decided to suspend the project, along with other Independent
Power Provider (IPP) projects in early 1998 to help ease the
financial burden of PLN.

Karaha then filed a law suit against Pertamina, PLN and the
government with an international arbitration court in Switzerland
in 1998, demanding compensation for the suspension.

In December 2000, the arbitration tribunal issued a ruling
ordering both Pertamina and PLN to pay $261 million to Karaha,
plus interest of 4 percent per year, starting from January 2001.

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

It has also begun a campaign to seize Pertamina assets in
North America including Texas, New York, Delaware and Canada,
saying that Pertamina had broken its contract and was not abiding
by the international arbiter's verdict to pay compensation.

Karaha is 37.5 percent owned by American energy firm Florida
Power, 37.5 percent owned by New York-based Caithness, 5 percent
by Japan's Tomer and 10 percent by local company Sumarah Daya
Sakti.