Case Studies: International

Arbitration Panel Awards Power Plant Owner Over $300 Million In International Construction Dispute

Summary:

Project owner Jaguar Energy Guatemala LLC and AEI Guatemala Jaguar Ltd. (“Jaguar”) hired China Machine New Energy Corporation (“CMNC”) as general contractor for the construction of a solid fuel-fired power plant near Port Quetzal, Guatemala.  After months of project delays, Jaguar terminated the general contractor for default.  Jaguar retained several subcontractors to complete the re-procurement and remaining construction work.

Jaguar filed liquidated damages and re-procurement claims against CMNC for approximately $350 million, with CMNC filing counterclaims of approximately $875 million.  Kenrich professionals provided independent expert analysis of Jaguar’s claims, as well as the analysis and rebuttal of CMNC’s delay and disruption claims.  With the help of Kenrich’s expert analysis and testimony at the International Chamber of Commerce (“ICC”) arbitration, the panel ruled that Jaguar was owed nearly all of its claimed amounts, while rejecting nearly all of CMNC’s counterclaims.

Background:

In 2008, Jaguar entered into a lump-sum, turnkey engineering, procurement and construction contract with CMNC for the design and construction of a 300 megawatt solid fuel-fired power plant near Port Quetzal, Guatemala.  The power plant was scheduled to start construction efforts in spring 2010 and begin operations in mid-2013.  The plant consists of two units and can be operated with coal fuel and/or petroleum coke, with the capability to run on 100 percent coal and up to 60 percent petroleum coke.

Throughout the project, CMNC failed to timely perform its engineering, procurement, and construction work, leading to lengthy unexcused schedule delays.  In 2013, after CMNC failed to achieve the scheduled take-over dates, Jaguar terminated CMNC for default.  Jaguar retained several subcontractors to complete the work post-termination.  Both units were ready for commercial operations in mid-2015.

Solution:

Kenrich was retained by outside counsel on behalf of Jaguar to assist in resolving the dispute.  Kenrich personnel analyzed Jaguar’s claims, as well as analysis and rebuttal of CMNC’s delay and disruption claims.  CMNC’s claims purportedly resulted from late site handover, delayed basic design approval, customs delays, visa delays, and other alleged owner-responsible impacts.  Kenrich’s analysis helped to show that CMNC’s delay and disruption claims were almost entirely unfounded – a position with which the arbitration tribunal later agreed.  Kenrich also analyzed and confirmed the reasonableness of Jaguar’s post-termination estimate to complete and schedule to complete.  In July 2015, Kenrich testified at arbitration hearings in Dublin, Ireland before a three member International Chamber of Commerce (“ICC”) tribunal.

Result:

In 2016, the ICC arbitration panel ruled in Jaguar’s favor, awarding over $300 million to Jaguar and effectively zeroing out CMNC’s $875 million in counterclaims.  As part of the reward, Jaguar recovered all of the liquidated damages amounts to which it was contractually entitled and recovered approximately 95 percent of its claimed re-procurement costs.