Frontline Ltd. absolutely rejects the correctness of the verdict given by the Indonesian Commission for the Supervision of Business Competition today. Following a review of the full text of the verdict, Frontline intends to take all steps to challenge it and have it overturned.
The verdict included a fine of 25 billion rupiah (approx. USD 2.6 mill.) and an obligation to compensate Pertamina with 120 billion rupiah (approx. USD 12.8 mill.).
The background for the verdict is an agreement made between Pertamina (the state controlled Indonesian oil company) and Frontline in June last year pursuant to which Frontline agreed to purchase two VLCCs from Pertamina subsidiaries.
The purchase was made on the basis of an open auction organised by Goldman Sachs on behalf of Pertamina.
Frontline submitted, together with a number of other industry players, an indicative bid in line with a detailed request for bids prepared by Goldman Sachs in late May 2004. The bid obviously reflected Frontline’s view of the market price of the vessels at the time.
Frontline was, in early June 2004, notified by Goldman Sachs that Frontline had been shortlisted as a possible purchaser of the vessels based on Goldman Sachs’ review of all bids received.
Frontline prevailed in the final round and finalised the purchase by way of executing memoranda of agreement for both vessels in a form prepared by Goldman Sachs in late June 2004. In accepting Frontline’s bid, Pertamina accepted that this represented the highest of the bids received in the auction.
Frontline has, subsequently, noted that the Indonesian Commission has investigated possible improper conduct by the parties involved in this transaction.
Frontline categorically denies having had any direct contact with any person in Pertamina’s organisation in relation to the sale.
Frontline furthermore absolutely rejects any allegations that their conduct in this transaction has been anything but proper and professional. The vessels were bought on market terms in an open auction where a number of industry players participated. It should thus be obvious that any loss claimed by Pertamina therefore is caused by the decision to sell rather than the terms of the sale or any improper conduct by Frontline.
Hamilton, Bermuda
March 3, 2005