By Staff Reporter
The government of Lesotho has moved to ‘reassure’ the public that its properties, local and abroad, are safe and protected from seizure by anyone or any organisation.
Government said this in a statement issued on Wednesday, following international media reports that Lesotho faces having 50 million euros (M855 million) of its assets seized around the world after breaching the terms of a contract with Frazer Solar GmBH.
“The government of Lesotho is aware of the circulating media articles purporting exposure to an arbitral award in favour of Frazer Solar GmBH.
“Whilst the government is trying to understand this issue, it urges both the public and its international partners to remain calm pending investigations.”
According to the reports, solar power company Frazer Solar GmbH was awarded the R855 million in damages by a South African court after the Lesotho government reneged on a contract, which was to be funded by the German government, as part of a wider programme to turn Lesotho into a net exporter of electricity.
South African media outlet moneyweb.co.za says a binding agreement was sealed in 2018 between Frazer Solar and Lesotho for the provision of up to 40 000 solar water heating systems, 20MW of solar photovoltaic capacity, one million LED lights and 350 000 solar lanterns nationwide.
In a statement issued by Withers Worldwide, the lawyers acting for Frazer Solar, it seems the project stalled in October 2018 when Lesotho’s Ministry of Finance refused to finalise and execute the project’s financial agreements. “Following this breach, Frazer Solar commenced arbitration proceedings in South Africa. No explanation for this refusal (to execute the agreements) has been provided to Frazer Solar by the government of Lesotho, but the resulting legal action concluded that a competing project had been prioritised.”
In March this year, Frazer Solar had completed a similar project in Eswatini, delivering hot water to every single government health clinic.
The government of Lesotho was given an outstanding opportunity to transform access to clean, renewable energy and to eradicate the use of damaging, polluting alternatives nationwide,” says Hussein Haeri, partner and co-head of International Arbitration at Withers LLP.
In a statement issued this week by Withers Worldwide, Frazer Solar “contends that the Government of Lesotho failed to fulfil its contractual obligations under the supply agreement, and in July 2019 gave notice to [the government of Lesotho] concerning the commencement of arbitration proceedings, in line with the dispute resolution mechanism agreed by both parties”.
It adds: “As a deterrent for breaches of the contract, both parties agreed to a ‘liquidated damages’ clause in the supply agreement, which allocated a pre-agreed and capped sum to be paid in the event that either party did not fulfil its contractual obligations.
“The independent arbitrator directed the government of Lesotho to pay Frazer Solar damages of €50 million, in addition to pre-award interest of €754 273, and post-award interest of 1.7% per annum.”
Timeline of events according to moneyweb.co.za:
- In November 2017, Frazer Solar submitted a proposal to officials in the Government of Lesotho (GOL) seeking approval for the installation of up to 40 000 solar water heating systems and up to one million LED lights in all government buildings and homes of public servants over a period of four years. The project was funded by KFW IPEX-Bank GmbH, a German export credit agency, with a loan to the value of €100 million repayable over a period of 10 years.
- On November 21, 2017, Frazer Solar and Lesotho signed a non-binding Memorandum of Understanding for the project.
- In August 2018, Frazer Solar met with Tom Thabane, then prime minister of Lesotho, and minister in the Office of the Prime Minister Temeki Phoenix Tsolo, to discuss a detailed presentation of the project, setting out the benefits, energy and cost savings it would bring about.
- In September 2018, following negotiations, a written supply agreement was concluded, signed by Robert Frazer on behalf of Frazer Solar, and Tsolo on behalf of the Kingdom of Lesotho. The financing agreement with KFW would be finalised by the minister of finance.
- In October 2018, Frazer Solar wrote to the Ministry of Finance to establish the reasons for a delay in finalising the finance agreements. Frazer Solar was told by the ministry that the project required cabinet support and leadership from the Ministry of Energy. However, this support had already been confirmed by the Office of the Prime Minister, which could not explain the ministry’s refusal to execute the financial agreement.
- In March 2019, lawyers representing Frazer Solar addressed a letter of demand to the office of the Prime Minister calling on the government to remedy a series of breaches of the supply agreement within 60 days. No answer was received.
- In July 2019, Frazer Solar declared an arbitration dispute between the parties and implemented arbitration proceedings.
