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ISLAMABAD: Port Qasim Authority (PQA) has approached Ministry of Maritime Affairs (MoMA) for recovery of liquidated damages (LDs) of over Rs 1 billion from Chinese company as per directives of Public Accounts Committee (PAC), well-informed sources told Business Recorder.

Sharing the details, POA invited proposals from GoP sanctioned coal- fired power plant developers/operators, either independently or through joint venture, to establish the dedicated coal terminal at Marginal Wharf 3&4, for minimum 4 million tons per annum coal handling capacity at the guaranteed applicability royalty for a minimum throughput of 3.5 million tons coal per annum on Built-Operate-Transfer (BOT) basis for self-use through advertisement on March 1,2016.

Huaneng Shandong Ruyi (Pakistan) Energy (Pvt (HSR) and M/s Qingdao Old Captain Shipping Company Ltd, a joint venture sponsor of the Company submitted its proposal for the purpose which was accepted. PQA and HFP&S (Company) entered into an Implementation Agreement (IA) on Oct 10, 2016 for the project for transshipment of coal at Port Qasim exclusively for "self-use" of HSR's Sahiwal Power Plant.

The recital of IA under (D) reads as follows: "the Sponsor has issued a letter of September 5, 2016 stating Huaneng Shandong Ruyi (Pakistan) Energy (Pvt.) Ltd or any company which owns or controls HS and/or SR will be December 31, 2016 becomes a 51% shareholder of the Company which was incorporated on February 15, 2016 to carry out the project."

HSR has 51% shareholding of the Company i.e. HFP&S as evident from the IA and holds the financial benefit and owns responsibility towards the project therefore the statement by HSR that it is not financially the beneficiary of the project is not valid. Hence, completion of the project and the payment of guaranteed royalty and LD charges are attributable to HSR.

The Phase-I of the project was required to be completed within 9 months from the date of signing of IA, ie, by July 09, 2017. The Company so far could not complete the project and default is attributable to the company for not finishing the project works.

Accordingly, the Liquidated Damages (LD) charges @Rs. 500,000 per day for the period from July 10, 2017 to January 31, 2023, ie, 2032 days amounting to Rs. 1,016,000,000 under Article 18.25(a) of the IA have accumulated on the part of the company, which will remain applicable until the completion date of Phase-I.

According to PQA, the Company is also in default in payment of Consultancy charges to M/s Nespak being PQA Consultant. A legal opinion was obtained from FGE Ebrahim Hosain who in a letter dated February 14, 2023 opined that HFP&S is liable to pay consultancy charges under clause C-1.2 of the Consultancy Services Agreement.

The sources said, Government Auditors have raised the issue of non-payment of LD charges by HFP&S and he Public Accounts Committee (PAC) during discussion of Audit Paras of ARPSE 2019-20 on account of PQA in a meeting held on November 16, 2022 decided “PAC reiterated its earlier decisions of October 5, 2022 that both the Secretariat of M/o Maritime Affairs and Ministry of Planning, Development and Special Initiatives ensure recovery from the company and report to PAC/Audit."

The PQA argues that being a Brownfield project, the royalty payable by the Company for throughput volumes is $ 2.4 per ton for 1-5 years under Schedule 13 of the IA signed between PQA and HFP&S. The royalty being paid by another project of coal, clinker and cement terminal established by Pakistan International Bulk Terminal (PIBT) under Schedule 13 of the IA signed between PQA and PIBT is $ 2.27 for l-5 years as the project was green field.

The PQA is also charging royalty of $2.27 per ton for first 1-5 years from another terminal, ie, 2x660 MW coal-fired power project established by Port Qasim Electric Power Company (PQEPC) under schedule 10 of IA signed between PQA and PQEPC which is also a greenfield project.

Pursuant to MoMA's letter of May 20, May 2022 on royalty settlement with PQA and Nepra, PQA forwarded a comprehensive reply in its letter of June 3, 2022,enclosing therewith PQA's letters of February 18, 2021 addressed to MoMA of February 18, 2022 addressed to Ministry of Planning, Development & Special Initiatives Energy Wing.

Keeping in view the PAC directives, PQA has requested MoMA to approach to

Ministry of Planning Development and Special Initiatives to take up the matter with HSR as the sponsor of the HFP&S for recovery of the payment of LD and Consultant charges.

Copyright Business Recorder, 2023

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