BGR to cancel contract value of $246 mn

Company rejects mutual settlement offer from Iraq's Ministry of Electricity

BGR Energy Systems has said it has decided to cancel a carryover contract value of $246 million from its order book. In 2013, the company entered a contract for $246 million for AL Nasiriya 500-megawatt (Mw) gas turbine power plant project with the electricity ministry of Iraq.

The ministry provided a letter of credit for 50 per cent of the contract value in favour of the company and the latter issued a performance bond.

The company said, since terrorists have taken over various parts of Iraq and continued terror attacks across the country, the company could not proceed with execution of the contract.

Meanwhiole the Government of India has issued an advisory against travelling to Iraq due to security risks. Subsequently, unilaterally MoE suspended the LC without any reason.

As there was threat of invocation of the bank guarantee of $12.30 million issued to MoE, the company obtained an order of injuction from the Madras High Court restraining the bank which has issued the guarantee from making any payment under the guarantee. The MoE so far not contested the legal proceedings.

MOE in April has issued a lega notice asserting their right to terminate the contract and disputing the force majeure conditions raised by the company and 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 has proposed to reject the claim of MoE.