Entergy, a major shareholder in the Hub Power Company (Hubco), has withdrawn a case from the International Court of Arbitration against Pakistan’s Water & Power Development Authority (WAPDA).
The long-running case to claim some $8 billion in damages over the independent power project’s life of 30 years came after WAPDA reneged on the power purchase agreement over allegations of corruption invloving the former administration of Pakistan.
Following the Entergy announcement, Hubco submitted another new tariff offer as the basis for a resolution of the three year dispute between WAPDA and Hubco. The conditional offer sought agreement from WAPDA and the government of Pakistan that the corruption charges against Hubco and its executives would be dropped, confirmation of the right to international arbitration and a guarantee of the sanctity of contracts.
However, the Hubco executives are not prepared to go to Pakistan to sign the final agreement while corruption charges hang over them and are waiting for the government and WAPDA to formally confirm acceptance of the three part package deal.
Given the nine year development of Hubco, the first IPP in Pakistan, the Hubco board suggests that it has delivered a commercial settlement that significantly reduces the rate of return to shareholders with the tariff to marginally above the production cost base. Nonetheless, agreement from Wapda and the government has, so far, not been forthcoming.
