ECC okays KE, SSGC arbitration deal

Aftab Ahmed

Islamabad: The Economic Coordination Committee (ECC) on Friday okayed the signing of a KE-SSGC arbitration deal for the acquisition of the latter by the Chinese firm.

The ECC also accorded approval for settlement of issues out of past transactions through Arbitration. The Federal Minister for Energy informed the Committee that new PPA would be signed with the K-Electric soon

However, the economic coordination committee has formed a committee to negotiate Terms of References (TORs) between power sector entities and KE. Asad Umar Minister for Planning will head a committee to negotiate TORs further.

The Ministry of Privatization made a detailed presentation before the ECC regarding the grant of the National Security Certificate (NSC) and outstanding payables and recoverable issues of Karachi Electric. Federal Minister for Planning and Energy updated the forum about the principles agreed between the Federal Government and the K-Electric to resolve most of their long-standing issues regarding additional supply and payment procedures during the last meeting.

The ECC appreciated the efforts made by all concerned and directed to expedite the signing of new Power Purchase Agreement (PPA) for smooth payment mechanism and uninterrupted power supply to Karachi. 

K Electric had submitted an application in 2016 for National Security Certificate (NSC) to the Privatization Commission in a bid to transfer 66.4% shares to M/s Shanghai Electric Power (SEP).

Sui Southern Gas Company (SSGC) has agreed to enter into an arbitration agreement with KE. This move will help KE transfer shares to a Chinese firm.

The ECC held a meeting on Friday to deliberate the issue.

However, SSGC management wants the government to give direction in writing to settle a dispute with KE over receivables through arbitration.

The Board of Directors has also authorized the Managing Director of SSGC to sign an arbitration agreement under the umbrella of the Federal Government.

However, it also directed the management to properly document and qualify the concerned officials of the ministries involved in the arrangement, including the SAPM.

The company wants the Cabinet to direct the SSGC to enter into this arbitration arrangement.

Officials said the proposed arbitration process involved a number of agencies, but will be conducted through a single mediation.

As this is a complex matter, the option of multiple mediators should be considered to protect the interests of the parties involved, the SSGC said in response to a summary prepared by the Power Division.

It said the federal government should ensure in writing that KE should implement the GSA with the SSGC after the conclusion of the arbitration proceedings.

The SSGC should have a principled approach to the treatment of LPS payments and their commitment.

The SSGC added that in order to seek clarification on various issues, the board asked the management to provide feedback on aspects of the arrangement.

The Board discussed the matter with the salient features of the Draft Arbitration Agreement and said that the dispute between SSGCL and KE is a matter of long delay which can be resolved through bilateral negotiations or in court.

As both the companies are utility companies, it is in the public interest to resolve the issue as soon as possible but without compromising in the interest of SSGCL. It agrees to resolve the matter through mediation at the direction of the ECC of the Cabinet.