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Ref: PVM/C 462-2/?

/07

Date: 15 th April 2007

NEM bv - Department MHS


Antoniuslaan 1C, H.I. Ambacht
P.O. Box 240, NL-3340 AE H.I. Ambacht
The Nederlands
For the attention of: Mr Slotman / Mr A. de Groot
Dear Sirs,
Re

: Layyah Power Station and Desalination Plant Extension, Sharjah, UAE

Subject : Notice to With-Hold Payment and Notice to Recover Liquidated Damages


We are in receipt of your letters ref: 22013-NPE-00510 1.230 and 22013-NPE-0511 1.230 both
dated 5th April 2007 and are very surprised to read the contents therein.
As previously informed by way of letters ref:
(i)

AB-C-462-2/113 dated 15th March 2007

(ii)

AB/C-462-2/073 dated 26th February 2007

(iii) PVM/C-462-2/0206/07 dated 15th February 2007


(iv) PVM/C-462-2/0200/06 dated 17th December 2006
and other relevant correspondence referring;
we have incurred substantial delays to our Subcontract Works for reasons totally beyond our
control and responsibility as detailed in the above and other referenced correspondence.
These delays have impacted the original completion date of 8 th August 2006 and in accordance
with Clause 4b of the General Purchase Conditions contained in Section 6, Appendix 1 of the
Subcontract Agreement Nr. 33203598 dated 14th October 2005, we have an entitlement to an
extension of time to the Date for Completion amounting to 395 days, i.e. 9th August 2006 to a
revised Completion Date of 7th September 2007, to complete our Subcontract Works.
The above entitlement arises from the 500% increase in piping from that priced at the time of
Tender to the actual quantity executed on site, i.e. 2,164 inch dia to 12,405 inch dia.
This entitlement is in addition to the delays arising the short supply of small and big bore piping
materials and the delays incurred due to the late receipt of civil foundations.
Furthermore, you have acknowledged that we have entitlement to extensions of time in previous
correspondence, i.e. NEM letter ref: 22013-NPE-00506 dated 20 th March 2007 referring, and that
to-date the time for completion of our works has been extended twice, once to 26 th October 2006
and again to 10th November 2006, bearing in mind that these revised dates were to the Mechanical
Installations only.

Following on from the completion of the Mechanical Installations is the necessity to test the piping
systems prior to insulation of the same. These activities alone would give a revised Date for
Completion of January 2007.
With specific reference to the manufacturing of the ducting, stacks, main steel structures and
secondary steel we would bring to your attention that all the fabrication items were completed
within the original time schedule. The delays incurred to the fabrication arise from late issue of
fabrication drawings, lack of sufficient details for hole details for fixing handrailing and gratings,
etc., together with late supply of Free Issue Materials. However, by increasing our resources we
were able to mitigate these delays and complete within the original time frame.
Nonetheless, due to the non-availability of civils foundations and the lack of storage areas on site,
we had to store the fabricated materials at our yard and within our workshops. This taking up
valuable space and denying us the ability to service other customers.
As and when foundations became available we did not delay in erecting whatever steel structures
we were able. However, this did lead to disrupted and out of sequence working.
Much of this information has been set out in our e-mail ref: PVM/C 462-2/090/06 dated 11 th May
2006.
Please note that we require compensation for extended preliminaries, running and overhead costs
for the above extended period of time for the Subcontract Works in accordance with Clause 3a of
the said General Purchase Conditions noted above, the details of which being submitted in due
course of time.
We would also bring to your attention our statement of account dated 15 th March 2006 [attached to
item (i) of the above referred letters] which clearly sets down those Invoice Nos. approved by
Messrs NEM site representatives, for example ref: C-462/MPS-12/267 and C-462/ADL-13/273
both dated 13th September 2006 [serial Nos. 23 and 24] and other Invoices [serial Nos. 27 to 46 up
to December 2006] which remain outstanding and unpaid at this time in contractual breach of
Clause 3b of the said General Purchase Conditions noted above and Section 2 Payment Terms,
pages 15 and 16 of the Subcontract Agreement referring.
The remedy for the above ongoing contractual breaches of the Subcontract Agreement are legal
damages for the interest / finance costs incurred at 12% per annum from the dates when the
payments became due in accordance with the relevant articles of the applicable Commercial Code
of Procedure in France, page 6 Governing Law and Disputes of the Subcontract Agreement
referring.
Details of our interest / finance costs will be submitted in due course.

We therefore consider that your Notice to With-Hold Payment and to Recover Liquidated Damages
is totally unfounded and a further breach of the Subcontract Agreement.
We formally give notice that should we not receive within the next seven days a substantial
payment in the amount of US$ 1,562,028.00 for our outstanding invoices and the awarding of a
further extension of time of 395 days as noted above, you will leave us no alternative but to
formally register a dispute with yourselves in accordance with Article 1 Commercial Conditions
Sub-Article Governing Laws and Disputes on page 6 and Clause 12 Applicable Law and
Disputes of Section 6 Appendix 1 of the Subcontract Agreement.
We look forward to your positive response in order to avoid possible arbitration and legal
procedures.
Yours faithfully
For and on behalf of
Petron Emirates Contracting and Manufacturing Co LLC

A. Bhattacharya
Director (Operations)
cc: Al Sharif Advocates Mr Jorg Seiffert
(or any other appropriate legal firm you wish to nominate)