ISLAMABAD: M/s Siddiqsons Energy Limited (SEL) has sought refund of encashed bank guarantee proceeds of $ 3.5 million in exchange for a performance guarantee (PG) of equivalent amount in form and manner acceptable to PPIB, sources in PPIB told Business Recorder.
SEL Chairman Tariq Rafi, in a letter to concerned authorities shared ongoing developments regarding the development of the Siddiqsons Energy Limited 330 MW coal fired power plant. The company was incorporated to develop power plant under the applicable power policy of Government of Pakistan (GoP). Private Power Infrastructure Board (PPIB) is the facilitative agency of the GoP and is mandated to implement the GoP Power Policies and facilitate the implementation of power projects.
SEL obtained a Letter of Intent from PPIB and completed various important project milestones including the completion of the feasibility study for its project and obtaining the Generation Licence and tariff determination from NEPRA. This entitled SEL to obtain the Letter of Support (LOS) from PPIB.
Pursuant to the terms and conditions of the LOS, the SEL was required to achieve Financial Close (FC) within the stipulated timeframe failing which the GoP (through PPIB) was entitled to encash the bank guarantee backstopping the LoS obligations of SEL.
According to the SEL, PPIB claimed that SEL failed to achieve FC within the stipulated timeframe, adding that although the delay was due to reasons beyond SEL’s reasonable control, PPIB sought the encashment of the bank guarantee of $ 3.5 million (BG) provided by the SEL.
The SEL filed a suit before a civil judge in Islamabad and sought a restraining order against the demand of encashment of the BG. However, the addendum restraining order was not confirmed by the civil judge and consequently the demand made by PPIB for the encashment of $ 3.5 million before the bank was honored and the amount was encashed.
The SEL, approached the Islamabad High Court against wrongful encashment of BG by PPIB and sought relief. The civil judge of the Islamabad High Court granted Mareva injunction directing PPIB to keep the BG proceeds of $ 3.5 million frozen and restrained PPIB from spending and utilizing this amount.
Through the Islamabad Court order of February 17, 2023, the appeal of SEL to Islamabad High Court was finally decided and the honorable judge decided as follows “PPIB accounts make provision for disputed guarantee sums that stands enchased whether such provisioning binds PPIB to conserve the funds until the case is finally decided.”
SEL argues that as a result of order PPIB has been bound by the Islamabad High Court to ensure that at all times the amount equivalent to the encashed BG is held in its reserve so that in the event of an adverse order against PPIB, the degree in favor of SEL may get satisfied.
Chairman SEL has claimed that in this scenario, the power company is out of pocket on account of $ 3.5 million and PPIB is also unable to spend and utilize this amount.
After explaining the background, the SEL stated that in light thereof and in order to resolve this matter in a manner where the interest of Government is protected and at the same time it continues to provide facilitation to the investor, the following two recommendations may be favorably considered: (i) PPIB may be asked to refund the encashed BG proceeds equivalent to $ 3.5million back to SEL in exchange for a PG of equivalent amount in form and manner acceptable to PPIB; and (ii) in order to facilitate the parties to resolve the dispute expeditiously, both PPIB and SEL shall agree to refer the matter to an arbitrator by entering into an arbitration agreement and mutually appointing an arbitrator who will decide this matter in accordance with the Arbitration Act, 1940. The award should result in the resolution of dispute between the parties.
Copyright Business Recorder, 2023
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