U.S. firm takes Indonesian govt to international court

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)