BGR Energy Systems Ltd has cancelled a USD 246-million order to set up a 500 MW gas turbine power plant in Iraq for Al Nasiriya.
"The company has now struck off a carryover contract value of USD 246 Million from its order book," BGR Energy said in a BSE filing today.
According to the statement, the company on October 13, 2013 had entered into an Engineering Procurement Construction (EPC) contract valued at USD 246 million for Al Nasiriya 500 MW (4X125) Gas Turbine Power Plant project with the Ministry of Electricity, Iraq (MoE).
In terms of the contract, the MoE provided a Letter of Credit for 50 per cent of the contract value in favour of BGR Energy and the company had issued a performance bond equal to 5 per cent of contract price i.E. USD 12.30 million in favour of the MoE.
The company said that due to unforeseen force majeure circumstances like the terrorists taking over various parts of Iraq and terror attacks across the country, it could not proceed with the contract.
The Government of India issued an advisory against travelling to Iraq due to security threats. Subsequently, unilaterally the MoE suspended the LC without any reason, it said.
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 (stay) from High Court of Madras restraining the bank which has issued the guarantee from making any payment under the guarantee, it further said.
The MoE has so far not contested the legal proceedings. The MoE on April 21, 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 per cent of the contract price within 60 days of acceptance of their proposal.
The company is seeking legal advice and propose to reject the claim of MoE, the company added.
