Legislators urge Karaha Bodas to resume project
Fitri Wulandari, The Jakarta Post, Jakarta
Legislators urged state oil and gas company Pertamina and the United States-based independent power producer Karaha Bodas Company (KBC) to end their legal dispute and sit down at the negotiating table to discuss the resumption of the latter's electricity project.
Priyo Budi Santoso and Emir Moeis of the Commission VIII of the House of Representatives said the power project was important for the country and the government had sent a strong signal to the international business community that it wanted the resumption of the project as well as other power projects, which were put on hold at the height of the economic crisis in 1997 and 1998.
"The (Karaha) project must resume as it is very significant for this country," Priyo told The Jakarta Post on Wednesday.
Commission VIII oversees environmental, information and technological affairs.
On Wednesday, President Megawati Soekarnoputri officially revived 13 mega projects worth US$7.63 billion, including several power projects.
KBC, which is principally controlled by two U.S. companies -- Florida Power Energy LLC and Caithness Energy LLC -- was one of 21 power projects which were delayed and reviewed by the government in 1997 as part of a belt-tightening effort to cope with the economic crisis. KBC has a geothermal power project in West Java.
The company is partly owned by PT Sumarah Daya Sakti, reportedly linked to Tantyo Sudharmono, the son of former Vice President Sudharmono.
The delay was agreed upon by the International Monetary Fund (IMF). Pertamina even said the postponement of the projects was based on the IMF's recommendation.
But, the policy led to a string of arbitration proceedings, including the one filed by Karaha Bodas.
In 2000, an arbitration panel in Switzerland ordered Pertamina to pay KBC US$261 million in compensation, including $100 million in compensation for the costs already incurred by the company and $160 million for loss of potential profits, according to documents provided by the company's spokesman in Indonesia, APCO.
Following the arbitration ruling, KBC launched a campaign to sequester Pertamina assets in the U.S., Singapore and Hong Kong.
The compensation award was, however, dismissed by many Indonesian experts as too high.
For instance, Riki F. Ibrahim, secretary-general of the Indonesian Geothermal Association, estimated that the company had invested less than $100 million when the project was suspended.
Priyo claimed that the amount of compensation demanded by KBC was disproportionately high.
"The case is like when you hit a hen with your car. The owner then demands compensation amounting to the price of the hen plus the eggs to be produced by the hen and the chickens that will hatch from the eggs," Priyo said.
Priyo and Emir warned that if Pertamina lost the case in the U.S. court, the House would call for an investigation into a possible collusion in the awarding of the contract to KBC.
In another development, KBC said in a statement on Wednesday that the U.S. District Court for Delaware had ruled in its favor by ordering Pertamina to post a $275 million bond to satisfy the Swiss arbitral award.
Simson Panjaitan, Pertamina's legal officer, claimed that the ruling was not yet final, and said that Pertamina had filed an appeal to have the order quashed.