Arbitration claim filed against Grenada government over repurchase of Grenlec shares

Arbitration claim filed against Grenada government over repurchase of Grenlec shares


By Caribbean News Now contributor

ST GEORGE’S, Grenada — On May 5, Grenada Private Power Limited (GPP), a 50 percent shareholder of Grenada Electricity Services Ltd (Grenlec), along with GPP’s parent company WRB Enterprises Inc. (WRB), filed a request for arbitration with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).

The purpose of this arbitration is to enforce the government of Grenada’s contractual obligation to repurchase the 50 percent Grenlec shareholding that the government previously sold to GPP.

GPP submitted a formal share repurchase demand to the government on March 22, 2017, pursuant to the share purchase agreement (SPA) that the government, GPP and WRB entered into when the government’s privatised Grenlec in 1994.

The SPA requires this repurchase to be completed within 30 days following the repurchase demand. Given that government has not made the mandated repurchase payment, GPP and WRB said they have no alternative means for protecting their contract rights other than by pursuing the ICSID arbitration as dictated by the SPA.

“During the past three years, Grenlec, GPP and WRB have made every possible effort to initiate good-faith, collaborative negotiations with government focused on facilitating responsible and effective electricity sector reform in Grenada, and thereby avoiding the necessity of our taking legal action to protect our contractual rights,” said Robert Blanchard, chairman and managing director of GPP, and president of WRB Enterprises. “Unfortunately, the government has consistently elected to rebuff these efforts by the Grenlec team, opting instead to pursue a unilateral approach for restructuring every aspect of how Grenlec’s system should be owned, operated and regulated.”

These unilateral actions led to the government’s enactment of the Electricity Supply Act 2016 and the Public Utilities Regulatory Commission Act 2016, which took effect on August 1, 2016.

“These two Acts cause substantial adverse operational and economic consequences for Grenlec, including (although by no means limited to) government’s effective abrogation of the Grenlec licence that the SPA parties committed to establish as the central aspect of Grenlec’s privatisation in 1994. This unilateral and injurious course of conduct has left GPP and WRB with no choice but to enforce their contractual repurchase rights in the manner dictated by the SPA,” GPP said in a statement.

In accordance with the specific repurchase valuation requirements, the demand for GPP’s 50 percent ownership interest in Grenlec amounts to EC$176.65 million (US$65.42 million).

“We want to stress again that our decision to file an ICSID claim was not driven by GPP’s and WRB’s desire to exit Grenada. We always have been, and remain, dedicated to assuring that Grenlec operates a world-class utility system that provides reliable and efficient electricity service to the nation. However, the government’s unilaterally-dictated course of action, implemented at odds with our agreed-upon and binding contractual arrangements, has left us with no other effective option,” Blanchard said. “If, on the other hand, the government demonstrates in a tangible and meaningful manner that it now wishes to engage in comprehensive and truly collaborative negotiations with the Grenlec team, we remain willing to participate in those talks in an effort to best serve the interests of our customers, shareholders, employees, and people of Grenada.”

In a statement on Tuesday, the government of Grenada said it was concerned and surprised at the arbitration filing.

“The government of Grenada has always maintained its willingness and openness to engage in discussions with GPP/WRB, and have specifically requested of WRB a meeting to hold discussions on said matter, to which their response was encouraging, and pending a mutually convenient date to hold the same,” the statement read.

According to the government, it wishes to see WRB remain engaged in Grenada’s electricity market; albeit in a more competitive environment. Under the reformed sector, GPP/WRB will maintain its profitability, as lower rates result in increased sales and high economic activities.

The government denied it has any interest in managing a utility company or that it has “hand-picked any investors to replace GPP/WRB”.

The Grenada government also claimed in its statement that it is “pro-business, pro-privatization and pro-international investment. This administration has done more than any other to welcome international investors.”

However, this claim is belied by the government’s own recent actions that, rather than working to attract foreign investment, are actively discouraging such investment.

Not only have the government’s unilateral actions caused serious operational impairments and economic injury to Grenlec and its private sector investors, for some months the government has been seeking unilaterally to terminate a 99-year lease, which was signed in 1991, and thus effectively expropriate property occupied by the Grenadian by Rex Resorts hotel, which is leased and operated by a UK-based company.

Earlier this year a court in Grenada temporarily blocked the government’s plan to seize land occupied by the Grenadian, a 172-room hotel located on the island’s southern tip.

The circumstances surrounding the government’s attempt to enforce a compulsory purchase order in respect of the Rex Resorts property have raised a number of questions locally concerning possible ulterior motives on the part of the government.