IPPs seek international arbitration against NTDC in payment dispute

KARACHI: Nine independent power producers (IPPs) are seeking international arbitration in a dispute over Rs11 billion in payments with the National Transmission and Dispatch Company (NTDC), which the IPPs say the government owes the power companies, sources said on Friday
The IPPs include Hub Power Company (Narowal), Sapphire Electric Company Limited, Halmore Power Generation Company (Pvt) Limited, Liberty Power Tech Limited, Atlas Power Limited, Nishat Chunian Power Limited, Nishat Power Limited, Orient Power Company (Pvt) Limited, and Saif Power Limited.
The nine IPPs invoked their right for international arbitration under the Power Purchase Agreement they signed with NTDC –the power purchaser.
According to details, the matter relates to a payment of Rs329 billion released to all IPPs in June 2013 by the present regime immediately after it assumed power.
The IPPs claimed payment of Rs340 billion, but Rs11 billion was disputed by the power purchaser. The disputed amount was claimed by nine IPPs, which insisted that the said payment should be made.
In order to resolve the dispute, the government and the IPPs agreed to the arbitration by an expert that in this case was a retired judge of the Supreme Court of Pakistan Muhammad Sair Ali.
This arbitration was agreed in line with the power purchase agreement both parties signed before the commissioning of their respective projects. The learned retired judge, after seven months hearing, declared that Rs11 billion was payable to the IPPs and asked the NTDC to make this payment. According to the power purchase agreement, both parties could either ask the expert for review of the order or challenge the verdict within 75 days at a higher forum that in this case were the respective international arbitrators in London.
Experts said in case of failure to challenge the verdict, the NTDC was bound to make the payment after expiry of 75 days, which elapsed on October 29, 2015. An official of one affected IPP said instead of challenging the decision of the expert at the relevant forum, the NTDC obtained a stay order against the decision from a civil court in Lahore.
“The power purchase agreement clearly laid down the procedure to resolve dispute and any deviation from the procedure was violation of the agreement,” the official said.
“The IPPs have simply asked the international arbitrators to order the NTDC to make the payment determined by a mutually agreed Pakistani expert.” Sources said all the nine IPPs have filed for international arbitration independently. They added that the international arbitrators have already issued notices to the NTDC to come and defend the case. The verdict of the arbitrator would be binding on both parties since an international arbitration clause was included in the power purchase agreement signed by the two parties. In case the international arbitrators in London uphold the verdict of the local experts, the NTDC would be bound to make the payment, and in case of its failure, the IPPs could invoke the sovereign guarantee of the government of Pakistan. Experts said a government entity failing to honour its contractual obligation with the investor sends a wrong message to the business circles around the world.