The Power Ministry wants the Rural Power Company Limited (RPCL) to settle its dispute with the former German-based LIPPS (Lahmeyer International Palli Power Services) outside the court, reports UNB.
The Power Ministry has already requested the Law Ministry to take measures to sit with LIPPS across the table for an out of court settlement.
"We've already referred the matter to the Law Ministry seeking its opinion… also requested it to take measures to settle the dispute with LIPPS outside the court," Power and Energy Adviser Tapan Chowdhury told the news agencies.
Following a dispute on illegal termination of a power plant operation and maintenance contract, the LIPPS last year won a Tk 2.0 billion (200 crore) international arbitration case against RPCL at Singapore International Arbitration Centre (SIAC).
The RPCL was established jointly by the Rural Electrification Board (REB) and five rural electricity co-operatives known as Palli Bidyut Samity (PBS) which set up the 70 MW Mymensingh power plant (Phase-I) in 1999 with the financial assistance of Asian Development Bank (ADB).
After installation of the Mymensingh plant, with the ADBN guidelines, the RPCL appointed the LIPPS for Operation and Maintenance (O&M) of the power plant under an international agreement.
LIPPS was basically a joint venture enterprise of RPCL and its German consulting counterpart Lahmeyer International GmbH.
RPCL and Lahmeyer respectively had 35% and 65% of shares in LIPPS. Later, under the direction of the donor agencies, RPCL divested its entire 35% share in LIPPS to Lahmeyer GmbH. In the meantime, a Bangladeshi entrepreneur, who was the local representative of Lahmeyer, took over the LIPPS from its German owners.
Since 2000, the LIPPS had been successfully operating the Mymensingh plant that led the RPCL to obtain the Asian Development Bank's recognition as a best power plant in Asia.
Being provided with the LIPPS services, RPCL doubled its generation capacity by installing additional units and made a net profit of Tk 3.78 billion (378 crore) during five years of operation tenure of LIPPS.
Following the success in Mymensingh power plant, the RPCL also moved for setting up a 450MW capacity large power plant at Konabari in Gazipur in 2003. The project was named Dhaka North Power Plant (DNPP). The Islamic Development Bank (IDB) granted a loan of Euro 50 million for this project.
With the advice of the IDB, the LIPPS was also appointed as the Operator for the new project under a separate international agreement.
The RPCL, following a dispute, unilaterally terminated the LIPPS from its O&M jobs in August 2005 and cancelled both its Mymensingh Plant and Dhaka North O&M contracts.
Against such unilateral termination, the LIPPS moved arbitration to the Singapore International Arbitration Centre (SIAC) to claim compensation from the appointee.
After a long hearing on the Mymensingh O&M Contract termination issue, the SIAC finally declared the LIPPS's termination as illegal and issued a ruling asking the RPCL to pay about Tk 2.00 billion (200 crore) as compensation against the Mymensingh plant O&M Contract termination.
Sources said the compensation amount is now increasing at a rate of Tk 50 million per month taking into account the compound interest on the principal amount. Since declaration of the case verdict in October 2006, the gross compensation with compound interest and taxes presently came to about Tk 5.0 billion.
Another arbitration case between RPCL and LIPPS against termination of Dhaka North Power Plant O&M Contract is still pending with SIAC in Singapore.
The caretaker government's Advisory Council recently decided to settle a similar case with the Netherlands-based Tulip Computers Company, which won the case at a court in the Netherlands.
Following the Tulip's case, now this RPCL-LIPPS issue has become the topic of discussion among the industry insiders. Referring to the fate of Tulip's case, they advocated the caretaker government to initiate a move to settle the RPCL-LIPPS dispute immediately.
"Otherwise, ultimately the government might have to pay more than Tk 5.00 billion (500 crore) to LIPPS and even more with compound interest," said a source.
When his attention was drawn, the Power Adviser said his ministry has already urged the Law Ministry to take measures to settle the dispute outside the court. "But I don't know whether the Law Ministry has taken any follow-up move to settle the case," he added.
Power Ministry wants to settle case outside court
FE Team | Published: August 25, 2007 00:00:00 | Updated: February 01, 2018 00:00:00
Share if you like