New IPP deals: PM tasks Fatemi to address Siemens’ grievances

ISLAMABAD: Prime Minister Shehbaz Sharif has deputed Special Assistant on Foreign Affairs, Syed Tariq Fatemi to hold a session on the dispute between M/s Rousch Power’s German partner M/s Siemens on a new deal negotiated by the Task Force on Energy, headed by the Minister for Power, Sardar Awais Khan Leghari, well-informed sources in Foreign Ministry told Business Recorder.

A letter written by German Embassy to the Power Minister on the issue of M/s Rousch Power was part of the agenda of Pak-EU talks a few days ago. SAPM on Foreign Affairs had also conveyed the concerns of German Ambassador to the concerned authorities.

The letter of German Embassy to Power Minister stated that recent developments have caused serious concern amongst the German business community in Pakistan.

Deals with IPPs: Rousch Power approves early termination of govt agreements

The Embassy, in its letter said that M/s Siemens has been a partner in the development of Pakistan’s power sector since the 1990s.

Siemens has invested substantial sums to establish Rousch Pakistan Power Limited (RPPL) as an Independent Power Producer (IPP) and RRPL, as an IPP, has an Implementation Agreement (IA) with the government of Pakistan and a Power Purchase Agreement (PPA) with government-owned Central Power Purchasing Agency-Guaranteed (CPPA-G). The term of both concession agreements runs till 2031.

The government has been informed that the current settlement agreement in its present form appears to be unacceptable to foreign investors, as, among other concerns, the currency transfer of the settlement sum and payments of all parts of dividends to the foreign shareholders on an account nominated by them, including an account abroad, is not being guaranteed.

“If, however, the receipts of the settlement sums as well as the currency transfer of the historic and future dividends as well as the partial sums from the settlement agreement were to be guaranteed, ie, by corresponding guarantees by the Ministry of Finance and the Central Bank, Siemens may see fit to agree upon the settlement sum and the termination of the project contracts, despite the settlement lying far below the real value of the plant,” said the German Ambassador in his letter.

Sources said the German government has conveyed reservations of M/s Rousch Power Project Limited (RPPL) - a power company owned by the family of former Minister Commerce and Industries Abdul Razak Dawood.

Under the Negotiated Settlement Agreement (NSA) with M/s Rousch Power, in addition to the outlined principles the following was agreed: (i) Being on BOOT basis, the Company will transfer the Complex to Government of Pakistan or its designated entity at one USD which will be paid in equivalent PKR at the prevailing exchange rate; (ii) the Company will be paid Rs 5.5 billion in lieu of OFME period due to early termination; and (iii) the Company will be paid Rs 2.8 billion for preservation of the Complex till the transfer to government of Pakistan or its designated entity.

According to sources, Georg Klussmann, Head of Division for Pakistan at German Federal Foreign Office, in a communication with Pakistan’s Embassy in Germany stated that German Government remains concerned about the manner of the negotiations with RPPL and shareholder i.e. Siemens.

M/s Siemens views the Settlement Agreement as unacceptable to foreign investors in its present form but is willing to negotiate in good faith in order to come to a resolution.

“Berlin is concerned that the protracted matter may overshadow future bilateral relations. Germany is aware of the risk this matter poses to the trust of German enterprises and investors and thereby broader Pakistan-German business relations,” the sources continued.

German side reiterated previous concerns about negotiations in connection with RPPL and sought intervention from decision-makers, the sources said, adding that Pakistan’s Charge d’Affaires in Berlin has proposed further engagement with German side to reach an amicable solution.

Copyright Business Recorder, 2024