AGL 22.90 Decreased By ▼ -1.83 (-7.4%)
AIRLINK 103.99 Decreased By ▼ -7.11 (-6.4%)
BOP 5.36 Decreased By ▼ -0.18 (-3.25%)
CNERGY 3.86 Decreased By ▼ -0.04 (-1.03%)
DCL 8.02 Decreased By ▼ -0.43 (-5.09%)
DFML 39.10 Decreased By ▼ -3.15 (-7.46%)
DGKC 86.95 Decreased By ▼ -2.65 (-2.96%)
FCCL 22.70 Decreased By ▼ -0.20 (-0.87%)
FFBL 40.59 Decreased By ▼ -1.39 (-3.31%)
FFL 8.89 Decreased By ▼ -0.15 (-1.66%)
HUBC 153.50 Decreased By ▼ -8.70 (-5.36%)
HUMNL 10.65 Decreased By ▼ -0.70 (-6.17%)
KEL 4.55 Decreased By ▼ -0.23 (-4.81%)
KOSM 3.90 Decreased By ▼ -0.16 (-3.94%)
MLCF 37.50 Decreased By ▼ -1.45 (-3.72%)
NBP 49.00 Decreased By ▼ -1.60 (-3.16%)
OGDC 134.15 Decreased By ▼ -2.96 (-2.16%)
PAEL 26.15 Decreased By ▼ -2.40 (-8.41%)
PIBTL 6.07 Decreased By ▼ -0.18 (-2.88%)
PPL 116.79 Decreased By ▼ -6.01 (-4.89%)
PRL 23.55 Decreased By ▼ -0.75 (-3.09%)
PTC 12.90 Decreased By ▼ -0.84 (-6.11%)
SEARL 57.25 Decreased By ▼ -2.80 (-4.66%)
TELE 7.45 Decreased By ▼ -0.31 (-3.99%)
TOMCL 35.74 Decreased By ▼ -3.66 (-9.29%)
TPLP 8.50 Decreased By ▼ -0.26 (-2.97%)
TREET 15.68 Decreased By ▼ -0.52 (-3.21%)
TRG 56.40 Decreased By ▼ -3.60 (-6%)
UNITY 33.40 Decreased By ▼ -1.00 (-2.91%)
WTL 1.18 Decreased By ▼ -0.04 (-3.28%)
BR100 8,433 Decreased By -274.3 (-3.15%)
BR30 26,639 Decreased By -1159 (-4.17%)
KSE100 80,118 Decreased By -1722 (-2.1%)
KSE30 25,681 Decreased By -584.1 (-2.22%)

ISLAMABAD: The Private Power & Infrastructure Board (PPIB) BoD has decided that court case filed by Siddiqsons Energy Limited (SEL) should be vigorously pursued to vacate stay order and subsequent encashment of bank guarantee, official sources told Business Recorder.

The PPIB Board headed by Secretary Power Division took this decision on June 21, 2022, just two days before Prime Minister Shahbaz Sharif sought report of SEL’s letter, in which the company wrote the entire history of its project, issues and future line of action.

According to sources, Managing Director, PPIB, Shah Jahan Mirza gave a brief history of the project that SEL was granted final (tenth) extension up to December 31, 2021 by PPIB Board in its 134thmeeting and SEL required to submit double the amount of its existing doubled Bank Guarantee and payment of requisite fee. Also, SEL was required to pay to CPPA-G by way of Liquidated Damages (LDs), a pro-rata amount equivalent to Transmission Service Charge (TSC) payable by NTDC to Pak Matiari-Lahore Transmission Company Limited.

The PPIB has claimed that on account of series of non-compliances on part of SEL, it issued Demand Notice to issuing Bank for encashment of Bank Guarantee and SEL obtained stay order from the Court of District Judge, Islamabad and the matter is now under litigation.

The sources said, now SEL has expressed intention to sell electricity to K-Electric instead of national grid and solicited support of PPIB. Also, they intend to settle the matter through negotiations while keeping the sub judice matter pending. SEL has also requested return of its Performance Guarantee (PG) based on the precedence of other projects. The precedence does not seem relevant in case of SEL, as every project has its own circumstances, security and documentation.

Encashment of guarantee: SEL approaches PM against PPIB decision

The Chairman/Secretary Power opined that if a court stay can be granted against PG encashment then there is a need to redraft the PG document as it is the only deterrent which Government of Pakistan (GoP) has for implementation of projects. On an enquiry about the details of stay order and follow up actions taken by PPIB Law Section, the Board expressed grave concern over delay in getting stay order lifted.

Representative Finance Division added that auditors in their report, have also observed increase in litigation which has not been pursued. The Board, thereafter, decided that PPIB Law Section shall not be paid performance bonus for this year.

Representative Petroleum Division suggested that there should be local arbitration clause in the agreements to avoid litigation. The Board discussed and concluded that at LOS stage, local arbitration will act as an additional advantage for the sponsor, which is not advisable.

Considering recommendations of Project’s Committee, the Board decided that the court case filed by SEL should be vigorously persuaded and once the stay order is vacated, bank guarantee of SEL should be encashed. The Board also decided that PPIB Law Section shall not be given performance bonus for current year.

The company, in its letter to Prime Minister, has claimed that the Company was due to achieve project Financial Close by February 2020. However, it was delayed due to the serious pandemic (Corona Virus) around the globe as well as in Pakistan which has affected all parties involved in achieving Financial Close. Therefore, the final approvals process of the lenders has been halted (including China Development Bank’s approval to United Bank Limited).

The company claims that it has already invested over $ 20 million as equity on the development of the project and is still determined to develop the project to assist the country in its efforts to overcome the energy crises and have the cheapest electricity at the National Grid System by using indigenous coal from Thar Coal Mine. The SEL argues that its project has great potential with excellent fundamentals being a top Merit Order (within top 3). Thar coal plant implies a saving of approx. $ 230 million per annum on account of coal imports.

The SEL will bring a savings of $ 48 million per annum through average Thar coal price reduction.

The current fuel cost element of imported fuel/fossil fuel ranges from Rs. 30/kWh to Rs 40/kWh. However, utilizing Thar indigenous coal the fuel cost element of this plant would be Rs. 2.5/kWh. This shall also help in reducing import of high quantity fuel, which is presently causing load shedding in the country.

Tariq Rafi, in his letter informed the Prime Minister, that despite the savings in foreign exchange remittances and high merit of the project, the lenders had shown their inability to fund the project for achieving financial close due to the huge circular debt of power sector which has accumulated to Rs. 2.5 trillion.

Copyright Business Recorder, 2022

Comments

Comments are closed.