U.S. firm takes Indonesian govt to international court
JAKARTA (JP): American giant power company Florida Power and Lights has filed arbitration proceedings against the Indonesian government in Geneva, Switzerland, for postponing its subsidiary's $1 billion power project in West Java, it was disclosed yesterday.
The president of Karaha Bodas Company LCC, which is partly owned by Florida Power, Robert D. McCutchen, told The Jakarta Post yesterday the arbitration proceeding were filed at the International Arbitration Court in April this year by Washington- based law company Boise & Shiller.
An official at the Office of the State Minister of the Empowerment of State Enterprises confirmed that the U.S. branch of the arbitration court, the International Center for Settlement of Investment Disputes, had recently notified the Indonesian government of the arbitration proceedings.
McCutchen said, however, by filing the arbitration litigation, Florida did not intend to demand compensation from the Indonesian government for postponing its power project, but was just asking for an explanation about the future of the project.
"We are not asking for compensation or anything. We are asking for... (the government) to tell us when we can continue our project," McCutchen said, adding Karaha was still interested in continuing its project.
"Basically, when we filed arbitration, we asked for an explanation for the period of the postponement of our contract," he said, adding the cancellation was against the terms of the contracts.
Karaha Bodas is one of 16 independent power producers (IPPs) who has had its contract postponed in a government retrenchment effort to cope with the economic crisis.
PLN had signed contracts with 26 IPPs but only 10 have been allowed to continue. The government also plans to renegotiate contractual terms with those who are allowed to continue their projects.
Analysts believe several other IPPs could take similar action as many of them are also upset over the government's unclear action over their delayed projects.
Karaha Bodas is 37.5 percent owned by the New York-based Caithness, 37.5 percent by Florida Power, 5 percent by Japan's Tomen and 10 percent by local company Sumarah Daya Sakti. Sumarah is owned by independent businessmen Muhammad Bawazier and Lodito Purwasih.
The company has the contract to build a 440-Megawatt (MW) geothermal power plant in Telaga Bodas and Karaha villages, in Tasikmalaya and Garut regencies.
The company signed the so-called energy sales contract -- a kind of purchase agreement for a geothermal power project -- with PLN in 1994, which, according to PLN data, states that PLN will buy power from Karaha Bodas at between 5.6 cents and 8.4 cents per kilowatt hour (kwh) for 30 years.
McCutchen said Karaha Bodas had invested $100 million of equity capital when the government first postponed the project last September.
In November, former president Soeharto allowed it to continue but postponed it again in January this year.
"For eight months, we have been waiting patiently but there is no indication from the Ministry of Mines and Energy, the National Development Planning Board (Bappenas) or PLN as to the condition of our project, so the shareholders decided to file the arbitration proceedings," McCutchen said.
The government has recently employed the Harvard Negotiation Group to help PLN renegotiate its contracts with the 26 IPPs. (jsk)