Luzon Hydro settles dispute with contractor

Luzon Hydro Corp. (LHC), the hydropower generation arm of the Aboitiz group, has settled a dispute with its turnkey contractor for the Bakun hydropower plant in Benguet.

In a disclosure to the Philippine Stock Exchange, LHC said it has entered into a settlement deed with Transfield Philippines Inc. (TPI), the contractor of the 70-megawatt Bakun plant, for the settlement of all disputes related to the turnkey contract.

LHC is 50-percent owned by Philippine Hydropower Corp., a wholly-owned holding company of Aboitiz Power Corp. TPI, on the other hand, is wholly owned by Transfield Holdings Pty Ltd of Australia.

“The settlement involving the payment by LHC of the sum of $14 million to TPI is intended to, without any admission of any liability by any party, fully and finally settle all unperformed and unpaid obligations between the parties under the turnkey contract,” LHC said.

It added the settlement will also involve any and all disputes, allegations, claims and threatened or actual litigation, arbitration or other proceedings between any one or more parties arising out of or related to the Bakun project.

The dispute between LHC and TPI arose in connection with the construction of the Bakun plant.

The dispute was taken to arbitration before the ICC International Court of Arbitration as provided under the turnkey contract.

“The arbitral tribunal delivered its final award on Aug. 9, 2005 and ruled that TPI was entitled to recover a total of approximately $24 million from LHC, net of counterclaim awards,” it said.

LHC has appropriately recorded the $24 million final award as a contingent obligation in 2005 with adequate provisioning for any negative effect on its operating profit and balance sheet.

The $14-million payment to TPI and the reversal of the provision will result in a net income of approximately $7.5 million to LHC.