Strikes off contract valued at USD 246 million from order book
BGR Energy Systems announced that the Company on 13 October 2013 had entered into an EPC contract for the value of USD 246 Million for AL Nasiriya 500MW (4X125) Gas Turbine Power Plant project with the Ministry of Electricity, Republic of Iraq ("MoE").In terms of the contract MoE provided a Letter of Credit for 50% of the contract value in favour of the Company and the Company had issued a performance bond equal to 5% of contract price i.e. USD 12.30 Million in favour of MoE. Due to unforeseen force majeure circumstances like the terrorists taking over various parts of Iraq and continued terror attacks across the country the Company could not proceed with execution of the contract. The Government of India issued an advisor/ against travelling to Iraq due to severe security risks. Subsequently, unilaterally MoE suspended the LC without any reason. There was a threat of invocation of the bank guarantee of USD 12.30 Million issued to MoE and hence the Company obtained an order of injunction from Hon'ble High Court of Madras restraining the bank which has issued the guarantee from making any payment under the guarantee. The MoE have so far not contested the legal proceedings.
The MoE on 21 April 2016 has issued a legal notice asserting their right to terminate the contract and disputing the force majeure conditions raised by the Company. Through this notice MoE gave an option to the Company for a mutual settlement demanding payment of compensation of 10% of the contract price within 60 days of acceptance of their proposal. The Company is seeking legal advise and propose to reject the claim of MoE.
Further material developments of the aforesaid matter, if any will be intimated at the appropriate time.
In view of these developments, the Company has now struck off a carryover contract value of USD 246 Million from its order book.
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