ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has returned CPPA-G’s tariff modification petition filed on behalf of Star Hydro Power Company, with observation that it is not maintainable in light of available legal evidence.

Star Hydro Power Limited (herein referred as the “Project Company” or “SHPL”) has setup a 147 MW Patrind Hydro Power Plant (the Project) in the territory of Azad Jammu and Kashmir (AJ&K).

The Authority granted permission to CPPA-G for procurement of power from Patrind Hydropower Project on September 29, 2008 and thereafter approved the levelized feasibility stage Tariff of Rupees 4.8223/kWh (US cents 6.1042/kWh) at reference exchange rate of Rs 79 per US Dollar) vide decision dated February 13, 2009.

AGP office distances itself from ‘award in favour of SHPL’

The Authority vide its decision dated January 27, 2012 approved the Power Purchase Agreement between CPPAG and SHPL for procurement of power pursuant to Regulation 5(6) of NEPRA Interim Power Procurement (Procedure and Standards) Regulations 2005 (IPPR), at a negotiated tariff of Rs, 7.0496/kWh (US cents 8.2936/kWh at US$/PKR exchange rate of Rs. 85.0) levelized over a period of 30 years starting from Commercial Operation Date (COD).

The CPPA-G, in a letter of August 31, 2018, forwarded the petition for Adjustment at COD submitted by SHPL for 147 MW Patrind Hydropower Project. The Authority on July 29, 2020 determined the COD stage tariff for SHPL in pursuance to SHPL’s award of tariff at Rs, 8.3924/kWh (US cents 8.3170/kWh @ Rs. 100.91/$).

The CPPA-G, on July 13, 2022 forwarded a tariff modification petition submitted by SHPL regarding the exclusion of debt damages pursuant to Section 6.5(b) of the Power Purchase Agreement between SHPL and NTDC.

The Authority also issued a decision dated May 02, 2024 in the matter of motion for leave for review filed by SHPL against its COD decision on July 29, 2020.

SHPL, in its modification petition, has submitted a request to revise the tariff, excluding the Principal Debt Damages awarded to SHPL in the London Court of Arbitration (LCIA) Award.

Subsequent to admission of the instant petition, the Authority held a hearing in the matter on March 28, 2023. The following list of issues were framed and discussed for deliberation: (i) whether the revision of debt service as claimed by SHPL is justified or otherwise and (ii) whether the LCIA award is challenged by NTDC at any legal forum or otherwise?

NTDC, in its letter of March 29, 2023 submitted that, “Principal Debt Damages determined by Arbitrator of London Court of International Arbitration on the basis of financing documents did not coincide with verified principal debt component determined by the Authority.”

NTDC said that keeping in view its argument, “petition filed by CPPA-G on behalf of SHPL for exclusion of Principal Debt Damages may be declined being not on merit.” During the hearing NTDC submitted that it has challenged both the recognition of the award and the extent of its implementation, whether in full or in part.

CPPA-G, in its letter of September 21, 2022 submitted that, “claim(s) made by SHPL in the tariff proposal are not enforceable under the applicable laws of Pakistan…to effect enforcement of a foreign arbitral award SHPL is required to apply for such relief before a High Court and obtain an enforcement order therefrom.”

The CPPA-G further through a letter of March 19, 2024 submitted a copy of the Judgment of Lahore High Court and submitted that the Lahore High Court has recognized the exclusive jurisdiction of NEPRA in relation to tariff matters such as the amount of Principal Debt Damages on which NEPRA has already decided in the COD tariff decision of July 29, 2022.

Accordingly, the High Court has held that “no claim could be brought by the Applicant regarding this amount before the Sole Arbitrator at LCIA”. Thus, SHPL is not entitled to any amount in relation to Principal Debt Damages pursuant to the award on account of the matter being in NEPRA’s exclusive authority and accordingly to be dealt with the tariff, as also reflected in the COD tariff decision of July 29, 2022.

In view of the foregoing, CPPA-G requested NEPRA to decide the tariff proposed exclusively based on the legal and regulatory framework pursuant to the NEPRA Act 1997.“ Also SHPL, in its communication of March 18, 2024 submitted a copy the Judgment Sheet from the Lahore High Court, related to SHPL’s application for recognition and enforcement of the Award, wherein at para 8 of the judgment sheet stated that “In view of above, this application is partly allowed and the Award is upheld while deducting the amount at clause (d) of paragraph 203 of the Award (The Award Amount),” which is $ 16.452 million, comprising of $ 9.507 million as Principal Debt Repayment and $ 6.945 million as delayed payment rate.

According to the determination, the Authority has observed that in the current scenario, the application under section 6 of the was partially granted by the Lahore High Court, specifically upholding the award while deducting the amount stated in clause (d) of paragraph 203 of the award.

Consequently, the portion pertaining to the payment of $ 16.452 million, comprising the Principal Debt Damages along with interest at the delayed payment rate, has not been recognized or enforced. Consequently, at present, there exists no enforceable award concerning the Principal Debt Damages in this matter. Only upon the issuance of a conclusive and final decision by the highest court of jurisdiction regarding the enforcement of the award, can be implemented.

Copyright Business Recorder, 2024