Jakarta court supports Pertamina in row with Karaha

Central Jakarta district court has lent support state oil and gas company Pertamina in a legal battle with U.S. power companies over compensation for an aborted geothermal power project.

On-line local news provider Detik.com quoted Pertamina's President Director Baihaki Hakim as saying Wednesday that the Central Jakarta district court recently issued a ruling that Pertamina won't have to pay compensation to the owners of the Karaha Bodas geothermal power plant, who are seeking $261 million in compensation from Pertamina after development of the power project was aborted in 1998.

"We have won the case, so that the execution of the claim cannot be done because based on Indonesian law, the claim must be processed here in Indonesia," Baihaki said.

In 2000, a Swiss arbitration panel ordered Pertamina to pay $261 million to Karaha after Indonesia suspended the companies' joint geothermal power generation project in West Java.

Pertamina is fighting to avoid paying the award and Karaha filed garnishment and discovery requests in Texas, New York and Delaware against U.S. banks it believes hold Pertamina funds.

Bank of America has frozen more than $130 million of funds belonging to Pertamina.

However, it remains unclear how the Jakarta court rulings will affect the legal proceedings in the U.S.

The Karaha case is the latest in a series of heated legal battles over Indonesian power projects. Many of these ventures began during Indonesia's boom years in the early to mid-1990s, only to be suspended in late 1997 and 1998, in the midst of Asia's financial crisis.

Karaha Bodas' principal investors are U.S. companies FPL Energy LLC and Caithness Energy LLC. FPL Energy is a unit of FPL Group Inc.(*)