CASE STUDIES – Dispute Resolution and Advisory Services
A Power Plant Construction Project
Mr. Pabon provided expert testimony in an international arbitration matter involving a power plant construction project. The case centered around a construction delay claim and associated market penalties. Mr. Pabon’s team assessed the economic validity of the claim from a regulatory perspective and demonstrated that the economic and commercial decisions made by the plant operator led not only to the imposition of penalties but also to an increase in their magnitude. Mr. Pabon opined that the decisions of the operator were made in a complex regulatory environment and driven by its own risk profile and that those choices were not required by market economics or the technical limitations of the plant.
An Investment Expropriation Project
Mr. Pabon provided an expert report on damages in an international arbitration case about the seizure of Claimant’s investments, the revocation of a tax exemption that had initially been enjoyed by Claimant, and, ultimately, the elimination of Claimant’s opportunity to earn a return on and of his investment. Mr. Pabon’s team assessed damages and economic implications of the expropriation of Claimant’s investment, which included an assessment of country risk and interest.
A Road Toll Case in Latin America
Mr. Pabon provided expert testimony in a road concession project. The international arbitration revolved around the interpretation of the Concession Contract adjustment mechanism and the alleged lost revenues due to the wrongful application of toll adjustments. Mr. Pabon’s team assessed the economic validity of the claim and demonstrated that the Contract was the regulatory instrument that governs and protects the parties’ relationship and that the adjustment mechanism, as suggested by Claimant, was based on a wrong reading of the Contract which would produce economic inconsistencies and outcomes. It was shown that the revenue shortfall claimed was baseless, and, that Claimant had over-collected revenues.
Defense of Private Investor on a BOO Power Plant Tender
Mr. Pabon acted as an expert witness representing a large US investor-owned utility in an alleged damages claim related to a build-own-operate power plant transaction in the Dominican Republic. The claim was centered on a breach of contract by not paying for advisory services allegedly provided by Claimant in support of Respondent’s evaluation of a possible bid to build a thermal power plant. Mr. Pabon provided critical economic analysis on the restructuring of the power sector, demonstrated that Claimant’s damages methodology was based on unsubstantiated and incorrect assumptions, and noted that Claimant’s rationale was based on conjectures not representative of industry norms and practices.
Advisory Services to the Brazilian Power Industry
Mr. Pabon led a team of economists advising Independent Power Producers (IPPs) on utility regulation and other energy market issues. The team assessed for the IPPs governmental proposals to segment the generation market, advised on their participation in energy auctions, and designed and implemented commercial strategies. In addition, Mr. Pabon’s team was also retained by several distribution companies to estimate the revenue requirement under standard regulatory principles, to advise on general tariff-related issues, and to train staff on utility regulation principles. Additional work for the industry included advisory services for the Brazilian electric distribution association and provision of technical advice in the assessment of regulations issued by the national electricity regulator (ANEEL) that dealt with the economic concepts for tariffs. Mr.Pabon’s team also assessed proposed electricity market rules for the wholesale market in Brazil.
Defense of a Latin American Government in an Electricity Construction Project Dispute
Mr. Pabon worked with a team representing a Latin American government against a company seeking contract reform and compensation related to a transmission line project. The company claimed that economic turmoil had made the project financially infeasible. Mr. Pabon’s team provided critical economic analysis to the Tribunal hearing the case, including insight on economic fundamentals and an assessment that the economic turmoil did not adversely affect the company.
A NAFTA Discrimination Claim in the Pulp & Paper Industry Addressing Electricity Regulation Issues
An investor sought compensation for alleged lost profits and diminution in value of its investment due to claimed discriminatory and unfair treatment by a government limiting the ability to arbitrage self-generated electricity against purchases from its regulated supplier. Mr. Pabon’s team conducted regulatory and economic policy analyses on restrictions on the resale of self-supplied electricity and showed that Claimant’s request was flawed because it did not follow regulatory policy and was inconsistent with economic efficiency principles. The team showed that the damages claim was without merit and that Claimant’s request would not add any capability to the utility’s resource portfolio but just to Claimant’s profits.
Structural Power Sector Reform in India
The States of Orissa and Haryana in India undertook a wide reform of their power sector. Mr. Pabon’s team played a key role in the reform effort in that sector with commission for the design and development of the regulatory framework. The team’s specific responsibilities included the analysis of legislation, regulations, licenses and guidelines; the design and implementation of on-site regulatory training; and on-site consulting on competitive procurements, performance standards, consumer affairs, regulatory economics, internal organization, and operating procedures.
A Gas Royalty Dispute in Latin America
A company with an integrated energy project that monetizes isolated gas reserves by generating electricity and transmitting it to market claimed that natural gas market changes should trigger royalty formula adjustments. Mr. Pabon’s team represented the respondent in the resulting dispute, conducting economic and commercial analyses of the royalty adjustment clause, and demonstrating that the company’s claim for damages was baseless because it did not compete with other gas suppliers and that the project as defined did not constitute a market. Essentially, the team showed that the company was trying to create an alternative, flawed argument of contract infeasibility.
The Delay in Construction of a Power Plant in a Nordic Jurisdiction
A major power reactor construction company filed for arbitration related to delay in the execution of construction work and project management issues against a power utility in a Northern European country. Mr. Pabon’s team conducted economic and financial analysis related to the delay and the contractual obligations assumed by Respondent with third party electricity off-takers. By using a replacement cost approach, it was showed that Respondent suffered damages associated with the loss of energy and the capacity value arising from the delay in the construction of the generation asset.
Regulatory and Asset Strategy for an Independent Power Producer
An IPP in the Dominican Republic facing a difficult financial situation needed to identify strategic approaches to address its problems. Mr. Pabon’s team provided a structure for assessing the IPP’s fleet of assets in the country by analyzing the flaws in the regulatory regime, identifying and prioritizing individual remedies, and assembling alternative strategies to optimize the value of the fleet of assets (distribution, generation, and an LNG facility).
The Latin American Transmission Tariff Dispute
A company claimed that the government had violated a Stability Agreement related to discrimination in the setting process of electricity transmission tariffs. Mr. Pabon and his team represented the government, offering insight on economic fundamentals and demonstrating the fallacy of using regulatory arguments in contracts disputes in unregulated commercial settings. In addition, the team noted the integrated nature of the project and showed previous benefits received by the project in other business segments.
The Middle-East Breach of Contract Dispute
A power plant and associated coal mine project in the Middle East was cancelled after a government organization imposed new terms on the project’s purchased power agreement. The Concessionaire filed a breach-of-contract claim before the International Centre for the Settlement of Investment Disputes. Mr. Pabon’s team assisted the Concessionaire in both the jurisdictional liability and damages phases of the case, demonstrating that the government’s positions were inconsistent with good-faith commercial practices and undermined the project’s financial feasibility.
Slovakia Electricity Market Design
The Slovakian regulatory agency –RONI– needed a model for the redesign of the wholesale electricity market, including the design of the market rules and regulation of transmission and generation in the context of privatization. Mr. Pabon co-led the development of the specifications of the price regulation formula for the transmission business and the guiding principles for transmission price reviews, calculation of the revenue requirement, and development of guidelines for determining cost-reflective transmission tariffs and procedures for ensuring non-discriminatory access to the transmission system.
The Asia Distribution Case Arbitration
An Asian State government argued that a “comfort letter” committed an international investor in a power distribution company to fund power costs owed to an energy supplier. Mr. Pabon worked with a team representing the investor in arbitration proceedings under local arbitration rules. The team analyzed the fundamentals of structural reform of the power sector, noted ways in which the government and regulator defaulted on their obligations, and demonstrated that funding operating losses through equity contributions was uncommon business practice.
Assistance to Brazilian Government Agencies
Mr. Pabon was part of a team that assisted the national electricity regulator (ANEEL) in developing its policies and procedures for tariff-related issues and identified the components of an institutional strengthening program for ANEEL. Additional work with the regulator included calculating distribution wheeling tariffs for certain electricity customers. He also advised the Brazilian System Operator on the commercialization of ancillary services in Brazil. Finally, Mr. Pabon was part of several privatization efforts undertaken in Brazil.