Private Power & Infrastructure Board (PPIB) is reportedly in trouble after an arbitration award by Multilateral Investment Guarantee Agency (MIGA) in M/s Star Hydro Power case, in light of a document signed in 1986 by the then Economic Affairs Minister, well informed sources in PPIB told Business Recorder.
Finance Division, sources said, has shared a letter which indicates a briefing note from MIGA for alternate MIGA Director for Pakistan on June 17, 2022, wherein MIGA provided breach of contract to Korea Water Resources Corporation and Daewoo Engineering and Construction Company, the sponsors, with respect to their equity investment in Star Hydro Power Limited.
According to PPIB, the sponsors have indirect equity stake in the company and owing to certain disputes between the company and the GoP/ its entities with respect to 147-MW Patrind Hydropower Project, the sponsors approached MIGA with respect to guarantee issued by MIGA.
PPIB maintains that until receipt of the letter, PPIB and Power Division were not aware of issuance of MIGA guarantee to the sponsors, adding that Article 15 of the Convention establishing MIGA, provides that MIGA shall not conclude any contract of guarantee before the host government has approved the issuance of the guarantee by MIGA against the risks designated for cover.
PPIB further argued that Article 38 requires each member country to designate an appropriate authority for communication with MIGA, adding that since Pakistan became signatory to the Convention on July 7, 1986, as per communiqué of this date, it transpired that Ihsanul Haq Paracha, Minister for Economic Affairs signed the Convention on behalf of Pakistan.
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Managing Director PPIB maintains that as any information to and approval of GoP for issuance of MIGA guarantee is critical for the purpose of determination of liability of GoP under MIGA, Economic Affairs Division has been requested to provide/ share all relevant information/ correspondence, if any, by and between the EAD (for and on behalf of Pakistan) and MIGA in relation to approval by EAD/ GoP for issuance of the guarantee in favour of sponsors.
According to official documents, the project enterprise obtained an arbitration award on May 18, 2022, under the project’s Power Purchase Agreement (PPA) against the offtake, the National Transmission and Despatch Company Limited (NTDC) for liquidated damages relating to delayed commencement of operations of the project, i.e., award.
The component of the award includes: (a) Rs 2,019,318,458 (for delay in invoices); (b) $ 16,452,807 (for principal debt payment that fell due in June 2017; (c) $2,727,240 (for legal costs); and (d) GBP 51,180.02 (for arbitration costs).
The guarantee holder has indicated to MIGA that it plans to make a demand on the Government of Pakistan pursuant to the government guarantee for the project with MIGA covering against the risk of breach of contract, should NTDC fail to pay the award on time.
