The government had issued Letter of Support (LoS) on January 1995 for the setting up of two barge-mounted combined cycle power generation units at Korangi, Karachi. The company finalised the security documents and achieved financial close in March 1996. However, it failed to start the project within the stipulated period and KESC encashed guarantee, the sources added.
The sources said, Sabah Shipyard, thereafter proceeded to arbitration under the International Chamber of Commerce (ICC) arbitration rules in Singapore against KESC and then GoP as guarantor for drawing upon the L/C claiming $6.84 million with costs and interest.
Further, resultant litigation between the parties has subsequently ensued with the most prominent being the claim against PPIB for damages of $510 million.
According to these sources, partly as a result of this litigation between Sabah Shipyard and GoP, the company has been declared bankrupt by one of the courts of Malaysia and has special administrators (liquidators) appointed to run its affairs in Malaysia. Pakistan has also initiated winding-up proceedings against the company in Pakistan before Sindh High Court (SHC).
The sources further said, since the company''s financial position was weak, it sought a negotiated settlement meeting took place in Singapore, but failed due to Sabah''s insistence that the amount of $6.84 million be returned and that the only negotiating point for discussion was the question of interest and costs.
The company, sources said now wishes to hold a second round of settlement negotiations for all outstanding litigation matters. Prior to the first settlement negotiations, Ministry of Water and Power had moved a summary to the Prime Minister, seeking his approval for proceeding out of court settlement negotiations, which he cleared but appointed Dr Tariq Hassan as lead negotiator.
The sources said, the issue is yet to proceed further as the Attorney General intends to view the terms and conditions to assess the suitability of the proposed settlement negotiations.