Hope for Mambilla project as Sunrise Power waives $500m penalty for Nigeria

Sunrise Power Transmission Company of Nigeria Ltd (SPTCL) has agreed to waive the $500 million penalty fee incurred by the federal government over multiple defaults of a $200 million settlement agreement on the Mambilla hydroelectric power project in Taraba state.

There has been a legal tussle stalling the execution of the $5.8 billion project.

Sunrise Power had, on October 10, 2017, dragged Nigeria to the ICC International Court of Arbitration, Paris, France, seeking a $2.354 billion award for “breach of contract” in relation to a 2003 agreement to construct the 3,050MW plant in Mambilla, Taraba state, on a “build, operate and transfer” basis.

The company also joined Sinohydro Corporation Limited, the Chinese company currently handling the project, in the arbitration.

To resolve the issue, the federal government agreed to pay Sunrise Power $200 million “within 14 days” of the execution of the terms of the agreement on January 21, 2020, and also pay a penalty of 10 per cent in case of a default in fulfilling the settlement agreement — in addition to restoring Sunrise as the local content partner for the $5.8 billion project.

However, the federal government was said to have entered into an out-of-court settlement in the course of arbitral proceedings at the court of arbitration following its default of over a half a billion-dollar penalty.

In an interview with Arise TV, Abubakar Malami, attorney-general of the federation (AGF), said Nigeria could have lost about a billion dollars to the case but for the “patriotic act” of Leno Adesanya, chief executive officer of Sunrise Power, to discontinue the arbitral proceedings in France.

Speaking on the matter, Kayode Ajulo, a fellow of the Chartered Institute of Arbitrators, United Kingdom, described the decision by Sunrise Power as the best, as it signifies the end of all impediments relating to the Mambilla project.

“Understanding how arbitration operates would give insight to this extant settlement. Since the funder, Chinese Exim Bank, and the contractor Syno Hydro Company are really pushing for the settlement agreement as failure to do so will not allow them to proceed further on the contract, it is imperative for the Government to honour its negotiation out of the pending arbitration in Paris with Messrs Sunrise Company, as a consent arbitral award to end the matter in order for the parties to move forward,” Ajulo said.

“The claim and any other ancillary expenses and or interest from the date the settlement agreement was signed to date, is the best negotiation ever the government has made.

“There should be an end to litigation, parties must resolve the issue and get to work from which Nigerian government and people will benefit mainly therefrom.”

The 3,050-megawatt facility, the biggest plant in the country and the second-largest hydropower plant in Africa when completed, was conceived in the 1970s but has suffered severe delays.