Pertamina appeals ruling in Karaha case

Pertamina appeals ruling in Karaha case

Moch. N. Kurniawan, The Jakarta Post, Jakarta

State-owned oil and gas firm Pertamina said on Friday it had
filed an appeal with the Central Jakarta District Court against
an arbitration ruling ordering Pertamina to pay US$261 million to
independent power producer Karaha Bodas Co. LLC in compensation
for the suspension of a power project in 1998.

Pertamina's finance director, Ainun Naim, said the appeal was
filed in response to legal actions by Karaha, which won
confirmation from the U.S. Federal Court in Houston, Texas, and
began seizing Pertamina assets around the world to satisfy the
ruling.

"We filed the appeal today (Friday). The international
arbitration ruling should be based on Indonesian law as the case
occurred here," he told The Jakarta Post.

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

It had invested $100 million developing the project when the
government suspended it, along with other independent power plant
projects, in late 1997 to help ease PLN's financial burden during
the economic crisis.

The moved prompted Karaha to file a suit against Pertamina,
PLN and the government with the International Arbitration Board
in Switzerland in 1998.

In December 2000, the arbitration board issued a ruling
ordering both Pertamina and state electricity company PLN to pay
$261 million to Karaha, plus 4 percent interest per year,
beginning from January 2001.

In December last year, Karaha won a confirmation from the U.S.
Federal Court in Houston approving the execution of the
arbitration board's ruling.

The company began a campaign to seize Pertamina's assets
around the world, including in Texas, New York, Delaware and
Canada, following Pertamina's refusal to pay the compensation.

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

Ainun said while Pertamina was pursing the appeal, it would
continue efforts to persuade Karaha to resume the power plant
project.