LAHORE: The federal government has challenged the decision of an expert it had appointed to settle payments dispute with Independent Power Producers (IPPs) that invoked the sovereign guarantee in 2013.

Muhammad Sair Ali, a former judge of Supreme Court, was appointed through Private Power and Infrastructure Board (PPIB) and with mutual consent of NTDC and IPPs after a dispute on payment erupted and as per the agreement both agreed on a decision to be taken by a mutually appointed expert, said an official source.

The expert after hearing the case passed his conclusion to the IPPs, NTDC and GOP (through PPIB) on Aug 15 this year, stating that: “The fulfillment of the power purchaser’s promise to make complete and timely payments precedes the company’s obligation to maintain a 30-day fuel inventory at site in order to make available capacity up to the contract capacity in accordance with the PPA.”

“The power purchaser’s breach of the PPA subsisted such that the company suffered financial losses in terms of the reduced capacity payments. The power purchaser is obligated to make good the losses resulting from its breach of the PPA in terms of the capacity payments as claimed. The realistic measure and pragmatic parameter to evaluate compensation for the losses of the company is the accrued shortfall of the available capacity during the period of dispute, for which unauthorised deductions were made by the power purchaser from the company’s invoiced amounts without duly disputing these amounts through an IDN (invoice dispute notice).

“The damages claimed by the company in the form of capacity payments at the deemed capacity are justified being direct losses. The power purchaser is thus liable to forthwith make payments for the claimed deemed capacity to the company,” said the expert.

However, the government challenged the observations under Section 18.2 of the Power Purchase Agreement (PPA) in the court of a senior civil judge, Lahore, and prayed to declare the expert’s determination as illegal, unreasonable, and arbitrary, said the source.

Published in Dawn, November 25th, 2015