Construction of two power plants in dispute
Arbitration likely between the Government and the Danish contractor
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The Danish firm Burmeister & Wain Scandinavian Contractor (BWSC) is heading towards the termination of a contract to construct two new power plants in Zouk and Jiyeh.

BWSC sent a notice of termination to the ministries of Finance, Energy and Water .
“There is no deadline for the notice. The contract may be terminated at any moment,” said a source close to the Embassy of Denmark.

BWSC had won the tender to build two new power plants in Zouk and Jiyeh in September 2012. Construction works were estimated at $350 million and the funds allocated by Denmark-based Export Credit Fund (EKF) through an HSBC escrow account. The two plants were supposed to generate 270 megawatts of power, combined. Delivery of the project was expected by November 2014.

Around 85 percent of the construction has been so far accomplished but the firm suspended the remaining work six months ago. The Ministry of Finance (MoF) did not transfer three installments (around $100 million) due to the company in the agreed upon time.

The MoF acknowledged the payment defaults and said that they are the reason behind the work suspension. The MoF did not give further details about what it plans to do regarding the matter.

Several legal repercussions will follow the contract termination. The Government is required to pay $275,000 for each day of payment delay, equal $50 million.

The MoF would also pay fines to HSBC for not transferring the funds.

Upon termination, the Government will be asked to pay $136 million to the firm, the amount that has been paid since the start of the contract.
“Termination would definitely lead to arbitration at the London Court according to the contract,” the source said.

Reported by Yassmine Alieh
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Date Posted: Sep 11, 2014