The High Court in Blantyre has frozen a bank guarantee for independent power producing company, Aggreko, pending conclusion of prospective civil proceedings between the company and Electricity Supply Corporation of Malawi (Escom).
A bank guarantee is a security for payment entitling Aggreko to cash it in case of non-payment of power provided to Escom.
The guarantee was due to expire end of October 2022.
Escom spokesperson Kitty Chingota confirmed the case.
In 2017, Escom signed a contract with Aggreko to produce power from diesel generators and Escom was responsible for supplying the fuel.
The first contract was signed in 2017 and was extended in 2019. The last extension expired in 2022.
According to sworn statements, the issues arise from a disagreement between the two entities over unaccounted for fuel received by Aggreko but not consumed by its machines.
Times understands that while Aggreko argues the gadgets for measuring fuel consumption were faulty, Escom says Aggreko did not communicate this development at any point in time that the meters were faulty.
Escom has been in negotiation with Aggreko on the matter.
According to the sworn statement, Escom has been withholding Aggreko’s invoices amounting to $4 million.
Escom has proposed to set off this amount with its fuel claim, a position which Aggreko does not agree with, shows the affidavit.
But Aggreko has already decommissioned all its assets from Malawi following the expiry of its contract, with only the bank guarantee remaining.
“I am further informed by our executive team and I verily believe the same to be true that the only defendant`s asset remaining in Malawi is the bank guarantee that is currently domiciled at FDH Bank at Umoyo Branch,” reads the affidavit sworn by Escom’s Director of Legal Affairs and Company Secretary, Sally Mtambo.
In the statement, Mtambo argues that if not stopped, Aggreko could cash the bank guarantee due to the outstanding invoices by Escom.
Escom fears that if Aggreko cashes the guarantee, then its fuel claim would fail as there would be no assets for enforcement in case of a judgement in Escom’s favour.
The High Court, Commercial Division in Blantyre Registry has since granted the freeze.
“Upon reading the sworn statement in support of the application, it is hereby ordered that an interlocutory freezing injunction be and is hereby granted restraining the defendant whether by themselves or their servants or agents or otherwise howsoever from encashing a bank guarantee in favour of the defendant domiciled at FDH Bank pending the hearing and determination of the claimant’s action or until further order of the court,” reads in part the court order dated October, 21, 2022.
The court says Aggreko can apply at any time to vary the order but must first inform Escom’s lawyers in writing at least 48 hours beforehand.