M/s Foundation Power Company Daharki Limited (FPCDL) has expressed willingness for an out of court arbitration with CPPA-G/ GoP with no obligation, liability or claim towards/ or by either party.
This message has been conveyed by CEO/ MD FPCDL, Major General, Muhammad Junaid (retired) in a letter to Power Division.
The Company had entered into a certain Master Agreement on February 11, 2021 with the Central Power Purchasing Agency-Guarantee Limited (CPPA-G).
As per Clause 8 of the Master Agreement titled “alleged savings, the resolution of the dispute as to alleged savings in tariff components as alleged in the report of March 16, 2020, titled Government’s Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap notified by the GoP on August 7, 2019, allegedly in violation of applicable GoP policies, tariff determined by NEPRA and the relevant project agreements will be done through arbitration in terms of the Arbitration Submission Agreement.”
The numbers reconciled between the Negotiation Committee and the FPCDL are to be submitted to arbitration in terms of the arbitration submission agreement.
FPCDL submitted “net profit” reconciliation to the Negotiation Committee which was reviewed by the Committee. Reconciliation numbers of the FPDCL were corrected during the Implementation Committees’ proceedings.
The excess profit in the case of FPDCL was a loss determined by the FPDCL of Rs 1.40 billion and loss as determined by the GoP Negotiation Committee said to be Rs 1.20 billion; hence, the difference in the determination of loss incurred by the FPDCL is Rs 0.20 billion.
According to the CEO, the company is resolved that it will not contest the GoP Negotiation Committee’s determination of Rs 1.20 billion loss suffered by the FPDCL. The Ad-hoc Arbitration Tribunal has not yet been constituted in the matter of Ad-hoc Arbitration between the GoP and the FPDCL and the terms and conditions of engagement of the arbitrators have not been finalized or agreed between the parties.
FPCDL has in the meanwhile submitted tariff modification petition before the NEPRA for adjustment and reduction of Return on Equity (ROE) and Return on Equity During Construction (ROEDC) component of the tariff as agreed between the FPCDL and the CPPA-G per clause 6 of the Master Agreement.
The adjusted and reduced components of the RoE and RoEDC with effect from July 1, 2023 are as follows: (i) Return on Equity (foreign) – reference tariff, Rs 0.4199 per unit and adjusted reference tariff Rs 0.3041 per unit; and (ii) Return on Equity During Construction (foreign) reference tariff, Rs 0.0770 per unit and adjusted reference tariff Rs 0.0558 per unit.
The CEO FPCDL argues that the Company does not wish to proceed further in the matter of Ad-hoc Arbitration between the FPCDL and GoP, adding that this approach shall save the exorbitant cost, fee and expenses of international arbitration proceedings including any appeals, reviews and revisions, as well as, enforcement proceedings to be incurred by the GoP in local and foreign jurisdictions, avoid disputes between two entities and thereby eradicate burden on the exchequer in foreign currency and exclude and eliminate potential risk of any adverse award against the GoP in foreign currency.
He further stated that the contents of this letter may be placed before the ECC/ Cabinet of the GoP with the following prayers: (i) the FPCDL does not wish to contest the amount of loss as determined by the GoP Negotiation Committee of Rs. 1.20 billion; (ii) FPCDL does not desire to commence the arbitration proceedings with the GoP in the public interest; and (iii) the FPCDL desires in the terms to settle the subject matter out of arbitration with the CPPA-G/ GoP with no obligation, liability or claim towards/ or by either party.
