LAHORE -  The London Court of International Arbitration has ruled against National Transmission and Despatch Company (NTDC) and issued its final award in favour of nine IPPs, directing the public sector transmission company to pay more than Rs 14 billion to the private power producers.

Back in 2015, the nine private power producers sought international arbitration for the recovery of their unpaid capacity payments of Rs 11 billion the NTDC owed them since 2012.

The IPPs had referred the matter to the international arbitration in London under their power purchase agreement with the power purchaser, NTDC, after the latter failed to implement the decision of a mutually agreed expert for the resolution of the dispute. The guarantor, the federal government, went to a civil court to get the expert decision annulled.

The dispute cropped up when the present government paid off the unpaid bills worth Rs 329 billion to the private power producers in June 2013. The billed amount was, however, Rs 340 billion, but the government stopped capacity payments of the nine IPPs.

The capacity payments pertained to the period in 2012 when the plants were available for generation, but could not generate power because of shortage of funds by the NTDC.

IPPs sources said the arbitrator first issued a final partial award according to which expert award became final and binding because of the failure of NTDC to implement the expert award or move the arbitration within stipulated time period of 75 days. In this final award the arbitrator determined the specific amount which was to be paid to the nine IPPs along with the interest admissible to IPPs.

The nine companies in the case were: Atlas Power Limited, Liberty Power Tech Limited, Nishat Chunian Power Limited, Nishat Power Limited, Hub Power Company Limited, Saif Power Limited, Orient Power Company (Pvt) Limited, Sapphire Electric Company Limited and Halmore Power Generation Company Limited.

The court, rejecting all submissions, arguments and requests to the contrary, ordered the respondent to pay the claimants Rs 10.977 billion pursuant to the expert determination, Rs 2.547 billion as pre-award interest in respect of expert determination, Rs 82.82 million for breach of the arbitration agreements, Rs 15.16 million and $ 5.51 million constituting the claimants’ costs of the proceedings, LCIA costs of the arbitration; interest on all amounts awarded to the claimants from the date of the final award (October 29, 2017) and until full payment of these amounts by the respondent.

The power producers used the LCIA as the last resort due to continuous failure of the NTDC and its guarantor, the government, to make payment and resolve capacity deduction issue. The IPPs invoked the Supreme Court’s jurisdiction under Article 184 (3) in 2012 and the court directed the NTDC to pay the outstanding amount, but it cleared only some amount and signed a memorandum of understanding (MoU) with IPPs and the government to resolve all issues through invoking the dispute resolution mechanism set out in the PPAs.

As an expert, Justice Sair Ali, ruled the NTDC’s commitment to pay within 30 days must precede IPPs’ obligation to maintain a 30-day inventory while deductions by the NTDC were unauthorised. However, the Sair Ali verdict was not implemented and the IPPs had no option but to go to the LCIA which declared the expert determination final and binding as per the provisions of the PPAs.

‘NTDC has the right to challenge award’

Staff Reporter from Islamabad adds: A spokesman of the Power Division while clarifying the news regarding award of London Court of International Arbitration in the case between NTDC and some IPPs, said that the expert determination on which basis the award is announced, is still under litigation in the high court in Pakistan besides a separate litigation in the civil court. He further said NTDC took the plea that the expert determination is under litigation and suspended by the appropriate court, therefore, the award should not be based on it. He said that NTDC has already challenged the Partial Final Award issued in June 2017 and this award is in continuation of the same and NTDC has the legal right to challenge this award.

Keeping in view the above facts, the spokesman said the government is thoroughly examining the award and will exhaust all available options to defend the case.