SNGPL loses claims of Rs19bn against NPPMCL

December 15, 2021 (MLN): Sui Northern Gas Pipelines Ltd (SNGPL) suffered a major defeat at an international legal forum as it lost claims of approximately Rs 19 billion against National Power Parks Management Company (Private) Limited (NPPMCL) in two arbitrations before the London Court of International Arbitration (LCIA).

NPPMCL owns and operates two 1200MW RLNG-based power plants in Punjab, situated in Haveli Bahadur Shah, (Jhang), and Balloki, (Sheikhupura) and procures RLNG for power generation from SNGPL.

The disputes arose when in May 2018, SNGPL raised take or pay invoices against NPPMCL and subsequently proceeded to recover Rs10.37 billion rupees from the gas supply deposit maintained by NPPMCL under its Gas Supply Agreements. Disputing SNGPL’s claims, NPPMCL contested the assertions of SNGPL on multiple forums and ultimately submitted the disputes for final resolution to LCIA as per the agreed mechanism under the Gas Supply Agreements, Business Recorder reported.

As per the details, the sole Arbitrator issued its final awards related to these disputes earlier this week, holding that the documents produced by SNGPL in support of its claims “are little more than self-serving evidence.”

The sole arbitrator also held that SNGPL wrongly drew down the amount of approximately Rs 10.37billion and directed SNGPL to pay the same to NPPMCL with interest from the date of recovery until full payment which amounts to approximately Rs 15.3 billion. In addition, the sole arbitrator also rejected SNGPL’s counterclaims against NPPMCL, including an additional claim of Rs 4.38 billion and stated that SNGPL had failed to discharge “its burden of proving their quantum.”

Terming the media reports misleading, SNGPL via notification to PSX stated, “the reports circulating regarding two arbitration awards involving SNGPL and NPPMCL are misleading.”

NPPMCL is a wholly-owned subsidiary of the federal government. It must be noted that arbitration and awards are private and confidential. A selective and misleading disclosure has been made of part of the awards. SNGPL will not violate the confidentiality commitment enshrined in the relevant rules; however, it has been constrained to respond given the ongoing speculation. SNGPL intends to fully explore and avail all legal remedies which are available to it and is consulting with its counsels in this regard, reads the statement.

It further stated that under the terms of the license granted to SNGPL by OGRA read with the decision of ECC of the cabinet dated May 11, 2018, and in line with the tariff regime in vogue, the company after exhausting all the legal remedies available under the law, will take up the matter with OGRA for determining the impact of the awards on revenue requirement of the company.

“Since the relevant awards relate to Take or Pay revenues and since these revenues billed to NPPMCL were earlier offered to OGRA as operating revenue, therefore, reversal of the same, if any, may not have any material adverse impact on the profitability of the company, the statement added.

As per SNGPL, the arbitrations arose from the decision of an expert who was a retired Supreme Court Judge, who had decided all issues in favour of SNGPL.

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Posted on: 2021-12-15T11:47:24+05:00