Govt refuses to pay KBC?s claim

Indonesian government will refuse to pay US$261 million claim of U.S. power producer Karaha Bodas Company (KBC) if PT Pertamina, Indonesia?s state?owned oil and gas company, loses its appeal in the U.S. court, Harian Ekonomi Neraca reported in its Wednesday edition.

It was Pertamina, not government, who signed agreement with KBC to build a geothermal power plant in West Java, a senior official of the Ministry of Finance said on Tuesday.

"It is Pertamina, not the government, which is involved in the legal dispute. That?s why, the claim is not to be paid using the government?s frozen accounts at Bank of New York and Bank of America," director general of finance Darmin Nasution said in Jakarta.

Darmin insisted that the government had not cancelled the KBC project, but only postponed it.

"If Indonesia loses, Pertamina, not the government, will pay the claim,? Darmin asserted, adding that the government would fight to get back its $650 million from the U.S. banks.

The Fifth Circuit Court in New Orleans hold its first hearing on Wednesday on the dispute.

The court is expected to deliver a final judgement in June 2004. In case Pertamina loses the battle at the Fifth Circuit Court, still there will be another chance to win the case at the U.S. Supreme Court.

The Karaha Bodas project is one of dozens of mega projects which were suspended by the government after the financial crisis hit the country in late 1997. (*)