Quadrant’s Damages Expert Testifies in Pre-operational Renewable Power Generation Facility Arbitration.

Quadrant’s expert, Dr. Daniel Flores was retained by the Dominican Republic (“Respondent”) as a quantum expert in a renewables power generation arbitration claim initiated by Dominicana Renovables, S.L. (“Claimant”) held under the arbitration rules of the ICC (ICC Case No. 23364/JPA). This dispute arose from a concession agreement between the Dominican Republic and the Claimant to develop and operate a wind energy facility.

Claimant alleged that Respondent breached the concession agreement by not granting Dominicana Renovables, S.L. a power purchase agreement with the Corporación Dominicana de Empresas Eléctricas Estatales (“CDEEE”), a state entity of the Dominican Republic.  Claimant alleges that the concession agreement gave it the right to build and operate a wind farm with a capacity of up to 100 megawatts on the concession area and to enter into a PPA that would entitle it to receive payments according to a regulated tariff for the energy sold to the CDEEE.  Claimant presented three estimates of alleged damages: (i) lost profits of US$ 288 million based on the Discounted Cash Flow method, (ii) US$ 151 million based on the Comparables Valuation method, and (iii) US$ 2.6 million based on the Sunk Investment Costs method.

Dr. Flores testified that the appropriate damages assessment in this case was the Sunk Investment Costs method due to the early stage of development of the project.   Dr. Flores also testified that the Discounted Cash Flow method was speculative and unreliable to assess damages in this case since the project was never built and there is no history of operations that allows a reliable forecast of future cash flows.  In regards to the Comparables Valuation method, Dr. Flores testified that the methodology proposed by Claimant’s expert was flawed since the projects selected were not comparable to the proposed project. The wind farm was not a “ready to build” project because it did not have all the permissions and contracts to be built, nor did it have an Engineering, Procurement and Construction Contract.

The Tribunal (President: Mr. Stanimir A. Alexandrov, Co-arbitrators: Mr. Oscar M. Garibaldi and Mr. Juan Pablo Cárdenas Mejía) issued an award for US$ 2.4 million based on the Sunk Investment Costs method. 

The Dominican Republic was represented by counsel who were then at Dechert LLP and are now at Wordstone Dispute Resolution.   Dr. Flores was supported by a Quadrant team that included Dr. Juan Riveros, Dario Gatti, José Díaz Barriga, and Andrés León.

Sources:  Italaw; Award