RI wants to meet Powell over power project dispute
RI wants to meet Powell over power project dispute
Dow Jones, Jakarta
The Indonesian government said Wednesday it hopes to hold
talks with U.S. Secretary of State Colin Powell over a dispute
between its state-owned oil and gas company and Karaha Bodas Co.,
a power company owned by mainly by U.S. investors.
Powell will be in Jakarta Friday for a one-day visit.
Energy Ministry Purnomo Yusgiantoro said he hoped to bring up
Pertamina's dispute with Karaha Bodas with Powell during the
visit.
"The government is seeking a win-win solution," Purnomo told
reporters.
An international arbitration court ordered Pertamina to pay
$261 million to Karaha Bodas as compensation for canceling a
power project in 1998 in the wake of the Asian financial crisis.
But Pertamina has refused to pay the award, and is attempting
through the Jakarta court system to overturn the arbitration
decision. A U.S. court has ordered Pertamina to drop the attempt
and found the company in contempt of court.
The U.S. Court of Appeals ruled in June to uphold a decision
in the U.S. courts to allow Karaha Bodas to freeze Pertamina
assets worth $275 million.
The Karaha dispute is the latest in a series of heated legal
battles over Indonesian power projects, some of which have caused
considerable tension in relations between the U.S. and Indonesia.
Many of those ventures began during Indonesia's boom years in
the mid-1990s and involved family members of former President
Suharto or other politically powerful Indonesians. But the Asian
economic crisis and the plunge in the value of the rupiah caused
many of the deals to fall apart amid allegations of graft and
contract padding. Foreign investors denied those allegations and
responded with counterclaims for compensation for breach of
contract.
Karaha, which is controlled by Florida-based FPL Group Inc.
and Caithness Energy LLC of New York, agreed in 1994 to build a
geothermal power project on Indonesia's main island of Java with
Pertamina and Indonesia's state electricity company, Perusahaan
Listrik Negara, or PLN. But under pressure from the International
Monetary Fund to reduce expenditure during the financial crisis,
the government canceled the plan in 1998 along with 15 other
projects.
Karaha, which claims that it already had invested about $100
million in the project, sued Indonesia, Pertamina and PLN. In
December, 2000, an arbitration court in Switzerland ruled against
Pertamina and PLN and awarded Karaha $261 million in compensation
for its costs and loss of future profits.