ISLAMABAD: Amid proceedings against rental power projects in the Supreme Court of Pakistan, Karkey Karadeniz Elektrik Uretim AS of Turkey has served a notice of default on government of Pakistan for alleged non-payment of over $6 million rent for making available its 232MW power project near Karachi.
'In pursuance of clause 22 (A) of RSC (Rental Services Contract), we hereby serve upon you this notice of default with respect to the outstanding invoices,' wrote Karkey's managing director Orhan Remzi Karadeniz.
Under the notice, the Turkish firm asked the government and state-run Lakhra Power Generation Company to 'cure the defaults immediately but in no event later than 30 days from the date of this notice, failing which we shall be constrained to pursue any or all remedies.
Besides non-payment of rental, the Turkish firm has contested a requirement of the State Bank of Pakistan to sign an undertaking to refund payments in case the Supreme Court takes decision against Karkey under a pending case.
In view of the case before the apex court, the centralbank had directed the Karkey to sign an undertaking that the payment of monthly rental services would be subject to the decision of the apex court and if such a decision is against Karkey, the disbursed amount would be refunded by it.
Karkey said the requirement was in violation of the amended rental services contract.
It said the directive was an attempt to curtail its contractual rights and also to avoid due and legal obligations on the government of Pakistan.
Under the circumstances, the Turkish company said it was constrained to demand that the subject amount be disbursed immediately or else it would proceed with making a call on the Government of Pakistan Guaranttee.
Interestingly, the validity of the guarantee is set to expire on Feb 12. In a separate letter, the Karkey called upon the federal government to renew its guarantee.
The company said that under the terms of RSC, each guarantee issued by the Pakistan government in favour of Karkey should remain valid for a period of 12 months from the date of execution and a renewal to be issued by the government atleast three months before the expiry of the previous guarantee.
'We note that the last guarantee was issued on May 14, 2011. Accordingly, the GoP is under obligation to issue an extension thereof not later than February 12, 2012,' the Turkish company said.
Karkey said the outstanding rental fee stood at $7.87 million on November 28, 2011.
After setting aside down payment and withholding tax, the net payable amount stood at $6.063 million, which should be cleared immediately without any condition for refund in case of an adverse decision by the Supreme Court.
A government official declined to comment on the Turkish default notices and or its threat to call on government guarantee, saying the subject was prejudice in view of pending case before the Supreme Court but indicated that none of the demands of the Turkish firm could be accepted at this stage.
He said the relevant authorities, including the central bank, had taken precautionary measures that could not be discussed unless the apex court decides the matter.
The court is hearing a couple of petitions against rental power projects.
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