Indonesia accepts Arbitrators decision on Karaha Bodas geothermal project
Wednesday, May 8 2002 - 04:29 AM WIB
However, before the payment would be made through state oil company Pertamina and state electricity company PT PLN, the government would propose two other options, Roes Ardjawijaya was quoted by the newswires as saying on Tuesday.
Ardjawijaya, deputy for investment affairs to the State Minister of State Enterprises, said in regard to the matter with the KBC, the government would prefer to settle it according to one of the options.
Under one of the options, the government would offer KBC the possibility of resuming its role in the Karaha Bodas geothermal project in West Java. "As our first option, we will give KBC a chance to return to its position as the project's handler because the government has lifted the presidential decree which freezed the project," he said.
He said the government expected the foreign company to accept the first scenario. But if KBC refused, the government would carry out its second option whereby it would give the project to another investor willing to continue the project and pay the KBC's claim.
If somehow both options proved unworkable, the government would ask Pertamina and PLN to continue the geothermal project - which was suspended due to the financial crisis - and pay the KBC's claim, Ardjawijaya said.
If Pertamina did not have enough money to pay the claim, the government would provide the funds as a loan to the oil company, he said.
"We will take this step because we don't want to see Pertamina ruined. But the final decision will be discussed by the team on the implementation of Presidential Decree number 133 and a limited cabinet meeting," he said.
Asked about the reasons behind the government's willingness to pay the KBC's claim, Roes said the government did not want to run the risk of its assets in US banks being executed and it wished to show the world community that it had a high commitment to international law.
"We must respect contracts we have signed and the law. If international arbitrators have decided that we should pay, we must oblige," he said.
Last February, in one of its press releases, the KBC said it had begun execution of a $261 million arbitration award against Pertamina following the latter's refusal to pay any portion of the award.
As a consequence of Pertamina's refusal to pay at the time, Karaha had begun seizing the Indonesian oil company's assets around the world in order to collect the award.
Karaha is an independent power developer which in 1994 entered into contracts with Pertamina and another Indonesian entity to develop the Karaha Bodas Geothermal Project in the country. Due to the Indonesian government's suspension of the geothermal project and its inability to continue it, Karaha filed for arbitration in Switzerland pursuant to the Arbitral Rules of the United Nations Commission on International Trade Rules.
In December 2000, after prolonged hearings, the independent arbitrators ruled against Pertamina, awarding Karaha approximately $261 million in damages. (*)