PGN declines Bapepam?s decision

The board of management of state owned gas company PT PGN voiced on Wednesday reservations over the fine imposed by stock exchange regulator Bapepam, saying the amount of fine was too high.

?We judge that the fine imposed by Bapepam is too high for use to pay. We thus decline to pay. The management will request leniency once we have officially received the (letter of) decision (from Bapapem),? PGN?s corporate secretary Widyatmoko Bapang said.

Widyatmoko said PGN had yet to receive a letter from Bapepam informing the firm about its decision.

?In principle, we can accept the administrative punishment. Still, the amount (of the fine) is too high,? he said.

?Our expectation is that with this decision, this problem has been resolved and we hope there won?t be any problem in the future so that we can work well and finish the project well,? he added.

Bapepam announced on Tuesday that five executives of PGN will be fined Rp 1 billion each for failing to disclose information to shareholders regarding a delay in a gas pipeline project linking South Sumatra to West Java.

The company itself faces a fine of Rp 35 million, Bapepam chairman Fuad Rachmany told reporters at a press briefing.

On Jan. 11, PGN announced that a key gas pipeline project would be delayed by three months. The company immediately lost almost a quarter of its market capitalization, or around $1.2 billion, as its shares dropped 23 percent to Rp 7,400.

Bapepam said that PGN knew about the delay to the pipeline beforehand but failed to disclose key information to shareholders. The regulator has alleged that insider trading may have occurred prior to the disclosure.

The gas pipeline, known as South Sumatra West Java II (SSWJ II), connects South Sumatra province to West Java province, where the capital city Jakarta is located. The pipeline is expected to help PGN's gas sale volume increase by 64 percent on the year to 555 million standard cubic feet per day in 2007, from 338 mmscfd in 2006. The project, originally slated for completion in December, finally came onstream this month.

A second South Sumatra-Java pipeline, known as SSWJ I, has also been delayed since last year, and won't come onstream until July 2007. (Godang)