Penalty in KBC case surges to $307 million

The total fines that are to be paid by state-owned oil and gas company PT Pertamina in a long-standing dispute over the Karaha Bodas geothermal power plant with the U.S. firm PT Karaha Bodas Company (KBC) have jumped to US$307 million , the Investor Daily Indonesia reported in its Tuesday edition

Pertamina, which lost the case to KBC in the U.S. court, must pay interest on the fine, which stood at only $261 million in February 2005.

“With a 4 percent annual interest rate, the fine amount had surged to more than $307 million. This happened because Pertamina didn’t want to settle the case, at the end the state is facing losses,” Pertamina’s government appointed lawyer Todung Mulya Lubis said on Monday in Jakarta.

In July, the government had appointed Todung as Pertamina’s lawyer replacing Simson Panjaitan. But Pertamina president director Widya Purnama has not yet issued a letter to appoint Todung as his company’s lawyer to handle with the KBC case

“During a meeting with the Minister of Economy (Coordinating Minister of Economy), the minister has asked us orally to deal with the case. But since the official appointment letter has not yet issued, we couldn’t move in this case,” Todung said.

The government cancelled KBC’s geothermal power plant in 1997 due to Asian financial crisis. KBC won the arbitration against Pertamina. Pertamina also lost its case in the appeals court. Now it has to pay $307 million to KBC.(*)