LAHORE: Three independent power producers (IPPs) — Orient Power, Saif Power and Sapphire Electric — have won their cases against the Sui Northern gas Pipelines Limited (SNGPL) in the London Court of International Arbitration (LCIA) for receiving payment of Rs800 million capacity charges due for the diversion of gas.
Another case that is currently under way in London deals with a much bigger amount of around Rs16 billion, sources in the power sector told Dawn on Wednesday.
They said that when the government withheld capacity payments from IPPs that were unable to run on full load due to payment default by the government, IPPs moved the court; the government requested IPPs to withdraw the case and go into arbitration.
Retired Justice Sair Ali, who was appointed with the mutual consent of IPPs and the Government of Pakistan (GoP), ruled in favour of IPPs. The decision only awarded the principal amount of Rs11bn and not the interest cost which had accumulated to Rs5bn (till the date of verdict, ie August 2015).
The government, however, took a stay order from a local court. The IPPs appealed in the LCIA to have the award enforced.
The terms of the agreement between IPPs and GoP stated that the losing party, which in this case is GoP, could only appeal in the LCIA after paying the winning party. GoP had not paid and was trying to contest the case. And if it also lost in the LCIA, it will have to pay the legal costs of the winning party which would amount to billions of rupees.
The sources said it was highly likely that the LCIA will also award the interest cost which means that GoP will have to dish out another Rs5bn on top of Rs11bn it has already lost in the first round, not to mention the interest of Rs80 million that is accruing every month since August 2015.
An informed source said the government should focus on resolving the issue and making fair payments rather than squandering billions of rupees of taxpayers’ money on a case that would surely end in defeat.
Published in Dawn, May 26th, 2016