Share transfer ban: Power ministry seeks Law's opinion on Summit's deal violation claim

The power ministry has sought the law ministry's opinion on whether the National Board of Revenue's restriction on share transfers by companies owned by Summit Group violates the agreements the government signed with the group's companies.

The NBR last week directed the office of the Registrar of Joint Stock Companies & Firms (RJSC) to restrict the transfer of shares of seven conglomerates, including Summit.

In response, on 4 October, Singapore-based Summit Power International Ltd (SPIL), the parent company of Summit Corporation Ltd, which operates Summit Power and other entities in Bangladesh, wrote to Energy Adviser Fouzul Kabir Khan and Finance Adviser Salehuddin Ahmed, requesting the removal of Summit's name from NBR's list.

SPIL in its letter, seen by TBS, also claimed the restriction on share transfers (purchase, sale, and donation) violated its companies' agreements with the Bangladesh government.

When asked, Energy Adviser Fouzul Kabir Khan told TBS, "We have requested the law ministry for its opinion on the company's claim regarding a violation of the agreements signed between SPIL and the government, stemming from the NBR restriction on share transfers."

"We have not yet received the ministry's opinion. Once it is received, the government will take appropriate action," he said.

According to SPIL's claim, lenders' step-in rights are considered a key feature of bankable project agreements and have been enshrined in the implementation agreement signed between the respective project companies (of Summit) and the government of Bangladesh.

In the letter, the company said that Section 9 of the agreement provides explicit rights to the lenders to take possession of the project upon occurrence and continuance of an event of default under the financing documents and the right for the lenders to assign their rights, interests and the rights of the project company to a qualified transferee. 

Section 10.1 of the agreement further stipulates that the government shall ensure that no government authority takes any discriminatory action which materially and adversely affects the project or the performance of the company's obligations, or the enjoyment of its rights or the interests of the investors or lenders under the security package or expropriates or, except as hereinafter provided, acquires the facility or the company, whether in whole or in part, it said. 

SPIL said that the notice issued by the NBR suspending Summit Group's right to transfer shares has compromised the lenders' rights under the project security package and consequently violates Section 10.1 of the respective project companies' implementation agreements.

Energy Adviser Fouzul Kabir said, "SPIL's claim appears unfounded. They are citing a violation of a clause in the agreement, but the NBR has imposed restrictions on share transfers under certain laws. In such cases, the law takes precedence over the agreement. Nevertheless, we have requested the law ministry's opinion."  

SPIL said, "Any restrictions on transfer shares imposed by the authorities would erode the security package and trigger an event of default under the relevant loan agreements."

"In addition, there is a potential concern that such events of default could lead to further cross-defaults, resulting in far-reaching detrimental impacts," it said.

Highlighting the fact that Summit Group's power companies are facing hurdles in opening fuel import letters of credit (LCs) due to the ban, SIBL said, With the impairment of lenders' security package and the climate of fear instilled in the local banking community by the issuance of this notice, Summit has encountered great difficulties in procuring the LCs required for the import of liquid fuels for our power plants."

"Summit's liquid fuel power plants are unable to comply with the dispatch instructions issued by Bangladesh Power Development Board. This has a significant adverse impact on Bangladesh's power supply situation, thereby reducing the country's economic growth prospects," said the company.

In the letter, signed by SPIL's Chief Financial Officer Wu Yan Bin, the company requested the government not to impose restrictions on Summit Narayanganj Power Unit 2, Summit Barisal Power, ACE Alliance Power, Summit Gazipur 2 Power, Summit Meghnaghat Power Company, Summit Meghnaghat Power Company 2, Summit LNG Terminal and Summit Bibiyana Power Company.

"All these projects are financed by renowned lenders and development agencies, including International Finance Corporation, Asian Development Bank, Islamic Development Bank, Swiss Export Risk Insurance, Deutsche Investitions– und Entwicklungsgesellschaft (DEG) and other European Development Agencies," said SPIL.

SPIL, which is 22% owned by JERA Co Inc, Japan's largest power generation company, has invested billions of dollars in Bangladesh in partnership with General Electric of the USA and Taiyo Life Insurance Company of Japan, generating capacity of over 2500 MW of electricity, for the Bangladesh Power Development Board and the Rural Electrification Board.

Furthermore, SPIL in partnership with Mitsubishi Corporation of Japan has developed essential LNG FSRU with subsea pipeline and mooring offshore infrastructure for Petrobangla, underscoring its commitment to supporting Bangladesh's energy security.