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.