Release: EMP: Lapindo Brantas is no longer consolidated in EMP?s book

( Jakarta , September 12, 2007)-- Indonesian publicly listed oil and gas company, PT Energi Mega Persada Tbk (EMP) today reported that it no longer financially consolidates Kalila Energy Limited (KEL) and Pan Asia Enterprise limited (PAN), the 100% owner of Lapindo Brantas, Inc. (LBI), starting July 1, 2007.

 

In an effort to resolve the Sidoarjo mudflow related issue, an immediate action to mitigate the situation must be done based on the Keppres No. 13/2006 and Perpres No. 14/2007. To do this, LBI requires significant funding from external source since LBI’s current internally generated cash flow is insufficient to meet such requirement.

 

Consequently, Minarak Labuan Co (L) Ltd (Minarak) as an affiliated company has advanced loan of US$30,000,000 to KEL and PAN as the 100% owners of LBI to meet the funding requirement for the Sidoarjo mudflow mitigation effort.

 

Minarak has indicated its preparedness to convert its outstanding loan into equity ownership in KEL and PAN, and ultimately controls the majority shares of LBI indirect subject to obtaining the shareholders’ approval.

 

While preparing for the Extraordinary General Meeting of the Shareholders to approve this Debt to Equity Conversion transaction to take place based on the Bapepam Regulation no. IX.E.1, on July 1, 2007 Minarak’s management has signed a Corporate Management Agreement (the “Agreement”) with EMP which gives Minarak the right to control the management operation, finance, and business activities of KEL, PAN, and LBI as the basis for extending the US$30,000,000 loan.

 

In the Agreement Minarak fully Indemnities EMP against all claims and liabilities from third parties in relation to KEL, PAN, and LBI and releases EMP from all responsibilities relating to KEL, PAN, and LBI that may have arisen prior to, on, and after July 1, 2007.

 

Under the Agreement, Minarak will be responsible for all the costs required to finance the operational activities in the Brantas PSC end to meet LBI’s portion of funding requirements relating to Sidoarjo mudflow mitigation effort.

 

Based on the fact that Minarak has assumed controls over the managements of KEL, PAN, and LBI as per July 1, 2007, and in compliance with the Indonesian Accounting Standard No. 4, EMP has ceased consolidating KEL, PAN, and LBI’s financial accounts with effect from July 1, 2007. (end of release)