International trade arbiter favors First Gas over Siemens

The Arbitral Tribunal of the International Chamber of Commerce (ICC) in London has given its "interim" decision initially favoring First Gas Power Corp. (FGPC) against the claim of its former contractor Siemens.

In a disclosure to the Philippine Stock Exchange, First Philippine Holdings Corp. (FPHC), the parent company of FGPC, said that last Nov. 1, the tribunal published its second interim award stating that "FGPC was entitled to liquidated damages for delay in total sum of $99.3 million."

At the same time, the tribunal declared that Siemens is entitled to extensions of time and/or "suspension of liquidated damages in respect to block 1 and block 2 completion of 32 days and 60 days, respectively."

FGPC has filed counterclaims against Siemens in the arbitration (primarily in respect to defects of the plant and the unpaid balance of the liquidated damages claimed) which, as revised, totaled approximately $83 million.

"The Arbitral Tribunal is now in the process of deciding the merits of FGPC’s claims," FPHC said.

FGPC originally claimed $215 million worth of entitlement from Siemens for alleged defects in its work. However, following submission of independent expert reports, FGPC revised the extent of its claims to $83 million.

FGPC entered into a turnkey engineering, procurement construction (EPC) Contract with Siemens AG, Siemens Power Generation, and Siemens Inc. in 1996 for the construction of the 1,000-megawatt (MW) Sta. Rita power plant in Batangas.

The Sta. Rita power project is a component of the Camago-Malampaya gas power project, which calls for the supply of natural gas to an aggregate capacity of up to 3,000 MW. The project delivers competitively-priced power to Manila Electric Co.

The dispute stemmed from Siemens’ alleged delays in the construction of FGPC’s power plant. FGPC said Siemens and its subcontractors incurred delays in project completion, with resulting costs amounting to $99 million.

FGPC said Siemens owes the Lopez firm $99 million under its EPC contract. As a result, FGPC withheld approximately $96 million of its milestone payments, inclusive of variation orders to Siemens.

In December 2002, Siemens submitted a request for arbitration to the ICC against FGPC arising out of alleged delays to the construction of the project.