Alexey Mordashov asks for money

Power Machines is seeking $ 384 million from the state to complete the Long Fu-1 power plant project in Vietnam.
As Kommersant found out, after lengthy negotiations, the Vietnamese authorities tentatively agreed to simplify the settlement process for the sanctioned Power Machines to execute the contract for the construction of the Long Fu-1 TPP. But the key problem remains the need to increase project financing by $ 384 million, the source of which is not clear. According to Kommersant’s information, Vietnam asked the Russian authorities to provide a loan for this project, but Moscow is not ready for this.

Power Machines by Alexei Mordashov continues to insist on revising the terms of the contract for the completion of the Long Fu-1 TPP in Vietnam. The next round of intergovernmental negotiations took place on December 10 in Moscow at the level of Vietnamese Deputy Prime Minister Vyong Dinh Hue and Russian Deputy Prime Minister Dmitry Kozak.

Their most significant result was that the Vietnamese side, as Kommersant’s interlocutors say, is generally ready to take into account Power Machines’s requirements for changing the currency of settlements under the contract with the work customer - PetroVietnam (PVN), transferring them from dollars to Vietnamese dongs or Russian rubles. Vietnam also agrees to make settlements through a direct interbank interaction channel and accept guarantees of the Russian Export Credit and Investment Insurance Agency (EXIAR) instead of bank guarantees or direct guarantees of Russian banks with state participation. Hanoi, according to Kommersant’s sources, generally agrees that Power Machines should complete the construction of the TPP.

The company is building a thermal power plant under an EPC contract worth $ 930.6 million and is responsible for the design and supply of basic equipment, as well as the organization of financing. The Vietnamese PTSC is engaged in civil works worth $ 204 million. The first power unit should have been commissioned at the end of October 2018, the second in February 2019.

But in January 2018, Power Machines fell under US sanctions, which led to a freeze on settlements (Vietnamese banks do not have a transaction scheme with sanctions companies), including from PVN, and more than a dozen large contractors left the project, including the American GE. At the end of January 2019, the readiness of thermal power plants, according to Power Machines, was 77.56%.

Power Machines sent a number of proposals to resolve the situation, but so far Hanoi has ignored them. As a result, on January 28, Power Machines sent PVN notice of termination of the contract, and in August, as reported by RBC, the company filed a lawsuit with the Singapore International Arbitration Center (SIAC) with a request to recover funds invested in the project from PVN. As Kommersant wrote on April 12, the conflict between the parties escalated due to the fact that PVN demanded payment of a bank guarantee under the contract in the amount of $ 93 million, which Unicredit Bank issued in January 2015 (it expired on April 11, 2019) .

Vietnam's readiness for dialogue does not remove all the contradictions of the parties. The key one is the requirement of Power Machines to extend the project by two years and increase the price of the EPC contract by $ 384 million. At the talks on December 10, the Vietnamese side asked the Russian government to provide financial support for the project, including through the provision of a loan. But, according to Kommersant’s interlocutors, Deputy Prime Minister Dmitry Kozak said that Power Machines is a private company, therefore, the government cannot provide budget support to it. Until January 25, 2020, this issue will be worked out by a separate Russian-Vietnamese working group, including representatives of Power Machines and PVN.

For its part, the Vietnamese authorities demanded to withdraw the claims of Power Machines and PVN against each other, but the Russian company is not ready to do this until all issues on the project are resolved, Kommersant sources say.

Pen & Paper Managing Partner Anton Imennov notes that it is difficult to determine whether third-party sanctions are grounds for non-fulfillment of contractual obligations. In a judicial dispute, it all depends on the substantive law that Singapore arbitration will apply, in particular on its concept of force majeure and the doctrine of a radical change in circumstances, the lawyer says.