LAHORE: A coal power producer has failed to stop the regulator from encashing performance bank guarantee, said sources.

According to details, Private Power and Infrastructure Board issued a notice of demand to a local bank for payment under the performance bank guarantee furnished by it on behalf of the energy producer for failure to achieve financial closing for the project by the date stipulated in the letter of support, which was extended for seven times.

The coal power producer approached the relevant forum for restraining the regulator from encashing the guarantee. However, the concerned bank honored the demand raised by the regulator and paid out the guaranteed amount.

The power producer made his last ditch effort by praying the relevant forum that the regulator should be directed to deposit the encashment amount in relevant forum account till the finality of his appeal.

He was of the view that the regulator has en-cashed the guarantee without justification, as his failure to achieve financial closing was due to a change in the policy of the regulator, leaving him into a situation akin to economic duress in choosing between abandoning his project development investment and risking forging ahead with the project, the imposition of transmission service charges as a condition to extension of the letter of support despite those charges not falling due under the terms of the power purchase agreement.

He also pleaded for being a victim of prejudice as one of his competitors was given a further extension of the letter of support without quadrupling the guaranteed sum.

Also, he said the demand notice by the regulator against him could not specify the ground for calling the guarantee, which, according to him, was required under the terms of the performance guarantee. However, since the bank had honored the demand of the regulator, therefore, the option of restraining the encashment of the guarantee became infructuous.

Copyright Business Recorder, 2024