Rental power saga: Turkish firm refuses out of court settlement

Karkey tight-lipped until restraining order on ships is removed.


Zafar Bhutta May 30, 2012

ISLAMABAD: Following advice of its government, Turkish rental power firm Karkey has refused to hold talks with Ministry of Water and Power to reach an ‘out of court settlement’ on rental power plant project until the restraining order issued by Supreme Court in respect of the two power ships is removed.

Port Qasim Authority on April 5 issued a notification that the vessels will not move from their position until completion of the inquiry or clearance from National Accountability Bureau (NAB).

A senior official of Ministry of Water and Power said that the government was making efforts to dissuade Turkish power firm Karkey from seeking international arbitration due to cancellation of its rental service contract. That government of Pakistan was recently served the notice of international arbitration.

The out of court settlement plan was discussed with the Turkish firm in a meeting held on May 17 to 19 in Lahore where officials of GENCO-IV, Pepco and other concerned officials attended these deliberations.

The advance payment to Karkey was approximately $80 million on the basis of 14% of rental fee. Karkey has been paid a sum of around $43.20 million as rent. The net value of units supplied by Karkey if calculated at the NEPRA approved tariff of 5.98 cents per unit, the net value thereof is $26.96 million. The amount payable by GENCO-IV in respect of the fuel cost component utilised by Karkey is $9.69 million.

“Karkey has been advised to stay away from any negotiations and to only follow the advice of Turkish government,” an official said quoting Karkey representative. “Karkey will not negotiate until the restraining order in respect of the two ships is removed,” they added.

After deliberations, the government has been suggested to make efforts to dissuade Turkish firm from going into international arbitration.

“For that purpose, some comfort level has to be provided and the proper course would be that the Turkish government be requested to nominate a person to be part of a two-member committee, the other member being the secretary water and power government of Pakistan, to deliberate and reach a solution which could be basis of a full and final settlement,” sources said quoting a plan worked out during meetings held in Lahore.

Sources said that Ministry of Water and Power was of the view that since the matter was also being actively pursued by National Accountability Bureau (NAB), the association of Chairman NAB in the committee was also proposed.

Published in The Express Tribune, May 31st, 2012.

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