A letter of credit (L/C) could have protected a company that supplies electricity tothe Canadian province of New Brunswick.

Now NB Power is having to renegotiate for the second time another contract with a Venezuelan state-owned company after it reneged on a deal to supply the utility with coal earlier this year.

Contract forfeited

Venezuelan state-owned Carbozulia recently forfeited a contract to supply coal to NB Power, according to New Brunswick's largest circulation daily paper.

Times & Transcript said an NB Power spokesperson told it that the company was in discussions with the Venezuelans to work out how the power company will be able to obtain feedstock for power production.

L/C protection

A local lawyer, Daniel Theriault, meanwhile told the paper that NB Power might have been protected if it had negotiated a financial guarantee and L/Cs requiring the supplier to post security.

The lawyer also expressed surprise that the power company had not taken such precautions, particularly since another state-owned Venezuelan company had reneged on a contract with NB Power in 2002.

"If you are stung once, you'd think you'd be a little more careful," he told the paper.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.