Pertamina seeks to resolve dispute with IPP
Pertamina seeks to resolve dispute with IPP
Moch. N. Kurniawan, The Jakarta Post, Jakarta
State oil and gas firm Pertamina is seeking an out-of-court settlement with independent power producer (IPP) Karaha Bodas Co. LLC despite last month's ruling by an international arbitration panel for the former to pay US$261.1 million in compensation for the cancellation of a power project in 1998.
Pertamina upstream director Iin Arifin Takhyan claimed on Tuesday that the verdict was not final and Pertamina had filed an appeal against the ruling.
"Now weUre asking Karaha Bodas to resolve the dispute through an out-of-court mechanism for the sake of all parties," he told The Jakarta Post.
Last month, an arbitration tribunal in Geneva issued a ruling ordering both Pertamina and state electricity company PLN to pay $261.1 million to Karaha Bodas, plus interest of 4 percent per year, starting from January 2001.
The compensation comprises $111 million for lost expenditure, $150 million for lost profit and $66,654.92 for costs and expenses during arbitration.
Iin said that Pertamina would approach Karaha Bodas to recommence the development of the $1 billion Karaha power project in Telaga Bodas and Karaha villages, in Tasikmalaya and Garut regencies.
RIt means Karaha Bodas and PLN will have to renegotiate the power selling rate just like in the case of several other IPPs,S he said.
The negotiation will also determine the amount of arrears to be paid by either Pertamina or PLN to Karaha Bodas, he added.
PLN officials were not available for comment.
In 1994, Pertamina and Karaha Bodas signed a contract to allow the latter to exploit geothermal power in West Java to be used for the planned power project.
Pertamina is designated by the government to regulate the geothermal, oil and gas industry in the country.
Karaha Bodas then signed an energy sales contract -- another form of power purchasing agreement -- with PLN to build a 400 megawatt power plant.
Under the contract, PLN was to buy electricity from Karaha Bodas at between 5.6 cents and 8.4 cents per kilowatt hour (kWh) for 30 years.
But the contract, along with the other 26 IPPs' contracts, was postponed by the government in 1998 because PLN was unable to pay power rates as stipulated in the contracts amid the sharp depreciation of the rupiah during the 1997-1998 financial crisis.
PLN had to pay power rates in dollars while it generates revenue in rupiah.
Karaha Bodas said it had invested about $100 million when the project was postponed. Karaha Bodas is 37.5 percent controlled by American giant Florida Power, 37.5 by New York-based Caithness, 5 percent by Japan's Tomer and 10 percent by local company Sumarah Daya Sakti.
Sumarah is owned by Muhammad Bawazier and Lodito Purwasih.
Besides Karaha Bodas, several IPPs also sought international arbitration to resolve their dispute with PLN, such as Himpurna California Energy, which built the Dieng geothermal power plant in Central Java province.