White Energy owns 51% of PT Kaltim Supacoal (KSC), while joint venture partner Bayan owns 49% and is required to pioneer the briquetting technology at the Tabang coal plant.

White Energy said senior representatives of the two companies “were unable to reach an agreement on commercial terms relating to the ongoing supple of coal by Bayan to PT Kaltim Supacoal (KSC)” at a meeting in Jakarta.

White Energy requested that Bayan continue to supply run of mine coal from the Tabang mine to KSC up until June 2012.

However this was rejected by Bayan who said White Energy would need to purchase its 49% of KSC for approximately $US45 million and then Bayan would supply run of mine coal to KSC up until June 30 2012.

White Energy dismissed this request informing Bayan it was in breach of its obligations under the joint venture agreement.

White Energy managing director Brian Flannery said its board and management team were heavily disappointed with the timing of Bayan’s recent actions “considering that modification works to address the remaining technical issues at the plant are in the final stages of completion”

“However, White Energy feels that it would not be in the best interests of shareholders to succumb to Bayan’s demand to purchase Bayan’s 49% of KSC for $US45 million as a condition of continues supply to KSC,” he said.

“Rather, White Energy will pursue its legal and other commercial options.”

White Energy has given Bayan seven days to rectify the breach and, in the meantime, will continue to review all of its available options, including discussions with other Indonesian parties regarding the construction of its BCB plants on their mine sights.

Flannery said the board still believed there was a strong demand from large coal companies in Indonesia and globally to partner up with White Energy to commercialise its BCB technology.

“Our strategy in Indonesia is to leverage our technology into securing future resource ownership, and we are well advanced in talks with a number of interested parties in this regard,” he said.

The JV partners have been on rocky terms since early November after White Energy revealed Bayan said expenditure on an upgrade on the Tabang project had been higher than expected and would not deliver sufficient returns.