Govt challenges arbitrator’s view in IPP payment row

Arbitrator says power producer must be made timely payments

LAHORE: The government has challenged the decision of an arbitrator in a payment dispute with independent power producers (IPPs) and has asked the court of senior civil judge Lahore to declare his opinion illegal, unreasonable and arbitrary.

The arbitrator, Muhammad Sair Ali, who is a former judge of the Supreme Court, was appointed with mutual consent of the National Transmission and Dispatch Company (NTDC) and the IPPs that had invoked sovereign guarantees in 2013 following excessive delay in payments by the government.

Both sides had agreed that they would abide by the decision to be taken by the expert.

After hearing arguments, Ali, in his conclusion sent to the IPPs, NTDC and the government on August 15 this year, stated: “The fulfillment of power purchaser’s (government’s) promise to make complete and timely payments precedes the company’s obligation to maintain a 30-day fuel inventory at the site in order to make available capacity in accordance with the PPA (power purchase agreement).”

He said the power purchaser’s breach of the PPA caused financial losses to the company in terms of reduced capacity payments and the purchaser should make good the losses.

The losses could be evaluated through the shortfall in capacity during the period of dispute, for which ‘unauthorised deductions’ were made by the power purchaser from the company’s invoiced amount, he said.

“The claim of the company for capacity payments has been computed in consonance with the PPA and established practice and the deduction made by the power purchaser from the invoiced amounts is a direct loss suffered by the company. The damages claimed by the company in the form of capacity payments are justified. The power purchaser is liable to forthwith make payments to the company.”

Ali was of the view that provisions of Section 9.6(d) of the PPA could not be applied to the capacity payment for deemed capacity and the company was not entitled to the payment of interest by the power purchaser on the awarded compensation for financial losses suffered by it

Published in The Express Tribune, November 26^th, 2015.

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