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T Pertamina says it will seize the assets of local petrochemical company PT Trans Pacific Petrochemical Indotama (TPPI) for failure to repay its piling debts.

Pertamina finance director Andri T. Hidayat said the state-owned energy firm had appointed an independent agency to appraise TPPI’s assets and was consulting with the Indonesian National Arbitration Agency (BANI) to discuss its legal options.

“We expected TPPI to be able to pay its debts. But they failed to fulfill their obligation, although they have tried as hard as they can,” Andri told reporters on Wednesday in Jakarta.

Andri said that Pertamina moved forward with the seizure on Aug. 17 and had informed all stakeholders of its decision.

TPPI, a subsidiary of the Tuban Petro Group, has debts of US$1.758 billion, comprising $589 million owed to PT Pertamina, $169 million owed to upstream oil and gas regulator BP Migas and $1 billion to state-owned Perusahaan Pengelola Aset (PPA).

TPPI previously closed its oil refinery in Tuban, East Java, due to its debt problems.

The company signed a debt restructuring agreement with its creditors in December. The pact, also known as a master restructuring agreement (MRA), provided a legal umbrella for its debt payments and a plan for the company to repay its debts.

According to the MRA, TPPI had to repay debts with a closing date of 75 days or face default. The deadline was extended several times due to TPPI’s inability to comply.

In March 2010, Pertamina filed a lawsuit against TPPI through the arbitration agency because TPPI did not show “good faith” to repay its debts.

Pertamina sent five notices of actionable default (NoAD) to TPPI, which were rejected by the firm, which filed its own notices of disputes (NoD) against Pertamina.

In July, Pertamina president director Karen Agustiawan gave TPPI a final warning, advising the firm that Pertamina would seize its assets if it did not repay its debts by Aug. 16.

Separately, Deputy Energy and Mineral Resources Ministry Rudi Rubiandini said that TPPI had been given a permit to export liquefied petroleum gas (LPG) so it could to earn money to repay its debts prior to the asset execution.

Rudi said that the ministry’s oil and gas director general, Evita Herawati Legowo, signed the permit.

“I know exactly that Bu Evita signed the permit. It was signed in August. I thought we were clear of the debt problem, but I guess there were still several points that TPPI could not agree to with Pertamina,” Rudi told reporters on Tuesday in Jakarta.

Rudi said that all the provisions in TPPI’s debt restructuring agreement were approved by the ministry and BP Migas.