Rental power: Pakistani team in Istanbul to finalize deal with govt, Karkey

A high-level government team is in Istanbul (Turkey) on a "secret mission" to finalise agreement with Turkish government and M/s Karkey Karadeniz Elektrik Uretin to be presented to International Centre for Settlement of Investment Disputes (ICSID) on January 20, 2020, well informed sources told Business Recorder.

The team comprises Minister for Power and Petroleum, Omar Ayub Khan, Attorney General for Pakistan, Anwar Mansoor Khan, Secretary Power, Irfan Ali, Joint Secretary (Power Finance), Zargham Eshaq Khan and a couple of senior officers of Inter Services Intelligence (ISI).

"Pakistan's team will exchange its draft agreement with Turkish team's draft and prepare a consensus document which will again be shared with the federal cabinet for approval before presenting it to the ICSID," the sources added.

Power Division which is supposed to take a lead role in this case is reluctant to sign any document due to a possible investigation by NAB and this responsibility has been assigned to the Attorney General for Pakistan. The officials of intelligence agency will also not sign the document.

There is an impression in official circles that whatever story is being sold by the government is perhaps not true and facts may be totally different.

The sources said when this case was presented to the federal cabinet a couple of weeks ago, Prime Minister directed Secretary Cabinet to seal the envelope as 'national secret'.

On December 3, 2019, the Federal Cabinet approved in principle, the deal with M/s Karkey, but directed Attorney General for Pakistan to give a presentation to it prior to submission of the final document to ICSID as dispute settlement office is established in the AG's office.

Under the agreement a rental power project was installed in Karachi to supply 232MW of electricity to the Pakistan Electric Power Company.

"We expect a final decision from ICSID on the dispute by the end of January 2020 as M/s Karkey will submit a request to withdraw its case," the sources continued.

"M/s Karkey will move an application to the ICSID that it intends to withdraw the case against Pakistan," the sources maintained.

Though the Government of Pakistan including Prime Minister Imran Khan praised Turkish President Recep Tayyip Erdogan for playing a constructive role in resolution of the dispute and waiving off $ 1.2 billion penalty amount, in fact no role has been played either by the Pakistani Prime Minister or Turkish President.

M/s Karkey was one of 12 rental power companies that had been awarded contracts by the Pakistan Peoples Party (PPP) government in 2008-09 to 'resolve' the power crisis. The company moved ICSID which imposed a $1.2 billion penalty on Pakistan in 2017.

On August 22, 2018, ICSID awarded against GoP along with interest thereupon. Subsequently Karkey went into enforcement of arbitration award of about $ 900 million against Pakistan in various jurisdictions including the USA, UK, Germany and France.

M/s Karkey had set up 'world's biggest' ship-mounted Rental Power Project (RPP) at Port Qasim, Karachi, pursuant to the Rental Power Policy 2008, announced by the then government of Pakistan (GoP). M/s Karkey entered into Rental Services Contract (RSC) on April 23, 2009 for generation of electric power with the Lakhra Power Generation Company Limited (LPGCL). Pursuant to the terms of the RSC, the GoP issued a sovereign guarantee to secure payment obligations of LPGCL and Karkey achieved commercial operations in April 2011. In the meanwhile, the Supreme Court in exercise of its original jurisdiction initiated suo motu proceedings against RPPs and through its detailed judgment of March 30, 2012, declared all RSCs void ab initio, being illegal and against public policy. The Supreme Court also directed National Accountability Bureau (NAB) to carry out an investigation under the NAB Ordinance 1999.

The ICSID awarded against GoP an amount of $ 760 million along with interest thereupon. After the award, Karkey went into enforcement of arbitration award against Pakistan in various jurisdictions. The sources said M/s Karkey will submit papers in ICSID showing that it has struck a deal with Lakhra Power Generation Company Limited (LPGCL), requesting to withdraw the case. The Turkish firm, sources said, is also being given a guarantee in writing that GoP or NAB will not take any further action against the company or its representatives in Pakistan.