Pertamina to fight asset seizure

Pertamina to fight asset seizure

Fitri Wulandari, Jakarta

PT Pertamina said it will take legal action to counter a Hong
Kong court's decision to temporarily freeze its overseas assets
following a prolonged dispute between the state oil and gas
company and U.S.-based power company Karaha Bodas Company (KBC).

Alfred Rohimone, Pertamina's finance director, said the court
has approved a temporary seizure of Pertamina's assets in Hong
Kong, including those belonging to Pertamina Energy Trading Ltd,
or Petral (a trading company owned by Pertamina), Tugu Insurance,
and Kipco (Korea Indonesia Petroleum Company Ltd).

The court also ordered Petral to pay its revenue from May 2002
to date to KBC.

"We are preparing lawyers. The assets should not be seized as
the U.S. court has ruled that Pertamina should pay the
arbitration award to KBC," Alfred told reporters on Wednesday
after a hearing with the House energy commission at the House of
Representatives.

Alfred said the court order would be effective for 23 days
from July 23.

KBC has demanded that Pertamina pay US$15 million plus $1
million in fees if the former is to drop the lawsuit against
Pertamina in Hong Kong.

Alfred declined to comment on whether Pertamina would accept
the settlement offered by KBC.

However, he acknowledged that the seizure would affect the
company's imports of crude and oil-based products as 60 percent
of the company's imports are carried out by Petral.

KBC was one of 27 independent power producers (IPPs) whose
projects were terminated by the government following the economic
crisis in the late 1990s. KPC at the time had a joint geothermal
power operation contract with Pertamina.

A Swiss arbitration court ruled in 2000 that Pertamina must
pay compensation to KBC for the termination of the project.
Pertamina challenged the arbitration ruling in courts in the
U.S., Canada, Hong Kong and Singapore.

But early this year, a U.S. court rejected Pertamina's appeal
against the arbitration award.

A U.S. court has frozen Pertamina accounts in the Bank of New
York and Bank of America that held royalties from overseas oil
and gas sales. The court agreed to release part of the
government's share of revenue but retained Pertamina's share,
which is actually equal to the arbitration award of US$ 291
million plus interest.

Pertamina's president director Ariffi Nawawi said that the
company was also seeking an out-of-court settlement to minimize
state loses.

Sidebar

Govt to reimburse subsidy spending

Director General of Financial Institutions at the Ministry of
Finance Darmin Nasution said the government would immediately
provide funds to Pertamina so that it could carry out its fuel
importation plan.

He said that the reimbursement of the fuel subsidy spending
undertaken by Pertamina should be enough to finance the fuel
imports.

"Pertamina does not need a government guarantee. The best
solution is to improve the company's liquidity," he said on
Wednesday.

Pertamina had earlier asked for a government guarantee to
allow the company to secure bank loans for fuel imports due to
cash flow problems as the government had not reimbursed the fuel
subsidy spending, estimated at about Rp 12.9 trillion for the
period from January to June of this year. -- JP