By Nalin Viboonchart
Published on February 28, 2011
Banpu is confident that a lawsuit claiming damages of Bt63.5 billion, filed against it by Thai-Lao Lignite (TLL), will not affect development of the 1,878-megawatt (MW) Hongsa power plant project in Laos.
Banpu recently secured a loan worth US$2.78 billion (approximately Bt94.62 billion) to finance the project.
Banpu CEO Chanin Vongkusolkit said that since Hongsa was developed by Hongsa Power Co (HPC), not Banpu, TLL’s lawsuit would not disrupt development.
Banpu holds a 40-per-cent stake in HPC, with Ratchaburi Electricity Generating Holding holding 40 per cent and Lao Holding State Enterprise with the remaining 20 per cent.
TLL, the Lao government’s former concessionaire for the Hongsa power project, filed a lawsuit against Banpu in 2007.
It alleged that Banpu and its subsidiaries deceived TLL into entering into an agreement in order to gain access to information about coalmine conces?sions and feasibility study reports on the lignite-fired power-plant project. As a result, TLL misinformed the Lao government, leading to the concession termination. The government later awarded the concession to the Banpu consortium.
Chanin said Banpu estimated it would take more than two years to complete the hearings, since TLL’s CEO Siva Nganthavee had been subject to a receivership order by the Central Bankruptcy Court and the official receiver would take his place in pursuing the civil case.
Chanin also denied TLL’s allegations, saying TLL invited Banpu to invest in the Hongsa power project in late 2004. However, there were certain disagreements during the development of the project and the agreement was terminated by TLL in July 2006.
In 2006, the Lao government was worried about delays to the Hongsa project. It terminated the mining concession and power project agreement with TLL and called for a new bid process. Three Thai companies including Banpu joined the bidding. About three months later, Banpu was awarded the right to conduct a feasibility study on developing the Hongsa project.
“Banpu puts much emphasis on good corporate governance, having adhered to integrity, transparency and fairness,” Chanin said.
According to Noppol Milinthanggoon, managing director of Ratchaburi Electricity Generating Holding, the Hongsa power project is about 30 per cent complete.
HPC last year secured a syndicated loan from nine banks, including Bangkok Bank, Siam Commercial Bank, Kasikorn Bank, and the Government Savings Bank, to finance the project. The power plant is set to be commissioned in 2015.
Despite Banpu’s confidence, James Berger, a lawyer from Paul, Hastings, Janofsky & Walker LLP, which is responsible for TLL’s litigation, is bullish on the lawsuit.
TLL also commenced arbitration against the Lao government in 2007.
In November 2009, UNCITRAL, the core UN legal body for international trade law, ruled that the Lao government improperly breached the agreement with TLL and ordered Laos to pay US$57.2 million (Bt1.75 billion) to the company.
The government is still refusing to pay the award, leading the law firm to commence enforcement proceedings under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). It subsequently filed similar actions in London, Paris and New York.
The French courts in July 2010 confirmed the ruling. The judgement from the New York Convention is expected to be made this month, said Berger.
Berger said Banpu agreed to pay the Lao government’s legal expenses in connection with any claims brought by TLL as a result of Laos’ termination of its concession. This, he said, pro?vided convincing evidence that Banpu benefited from the termination.
He said there was also a memorandum to the prime minister of Laos in which the chairman of the Committee for Planning and Investment stat?ed that selecting a new investor by way of an auction was not desirable because the government would have to spend a long time preparing documents. And Banpu had all the information needed to decide to develop the project.
When TLL terminated the agreement with Banpu, it requested that Banpu return all information concerning the Hongsa project, but Banpu refused to do so, he said.
“Laos is heavily dependent on foreign investment for its infrastructure development. The refusal to honour the arbi?tration award is really a fundamental breach of trust that may become an obstacle to Laos’ ability to lure foreign investors,” he said.
A Thai lawyer from TLL said the company was more confident about the suit against Banpu after the arbitration ruling.
TLL insisted construction in 2006 was on track and there was no reason for the termination.
Regarding the civil lawsuit against Banpu, TLL claimed damages of Bt63.5 billion. Including interest of 7.5 per cent per year, the amount now totals Bt80 billion.
Echoing Chanin, the lawyer said he expected the case between TLL and Banpu to be concluded in 2012 or 2013.