Pertamina to regain part of frozen funds at BoA

Fitri Wulandari, The Jakarta Post, Jakarta

State-owned oil and gas company Pertamina said on Tuesday a U.S. court had issued a ruling that would allow it to recover part of the some US$520 million currently frozen by Bank of America (BoA) at the request of power producer Karaha Bodas Co. LLC.

Pertamina legal counsel Simson Panjaitan said that in its injunction on June 18, the District Court of New York ordered Bank of America to freeze only $275 million of the funds, until the court delivered its final ruling.

"The rest of the funds can be released," Simson said, adding that the U.S. court was expected to deliver its final verdict in early September.

The funds were revenue from the sale of liquefied natural gas (LNG), which is an important source of revenue for the state budget.

Karaha Bodas asked Bank of America to freeze the funds in a bid to collect an outstanding payment from Pertamina, after a Switzerland-based arbitration panel ruled in favor of the independent power producer in a long-running dispute over a power purchase contract.

Pertamina has said that the funds belong to the government.

According to Simson, the $275 million still frozen by Bank of America consists of a $261 million arbitration award plus interest that the arbitration panel ruled Pertamina must pay Karaha Bodas.

Pertamina and Karaha Bodas have been entangled in a serious legal battle here and in the U.S. following the government's decision to suspend the Karaha geothermal project in West Java in 1998.

Karaha, which is principally controlled by two U.S. companies -- Florida Power Energy LLC and Caithness Energy LLC -- filed a complaint with the Switzerland-based arbitration panel, which ruled in its favor in 2000.

Pertamina was ordered to pay Karaha some $261 million in compensation. Karaha claimed it had invested $100 million in the project before it was suspended.