Iberdrola Energy Projects has reportedly filed a lawsuit in New York state court saying that a group of firms that control Footprint Power Salem Harbor Development, wrongly sought to draw on a standby letter of credit (L/C).

The L/C was issued to ensure the Spanish multinational electric utility company performs its obligations as the engineering, procurement and construction (EPC) contractor hired to build the power plant in the US state of Massachusetts.

Dispute outline

Iberdrola claims that Footprint Power, which is managed by Oaktree Capital, decided to force a termination of the EPC contract.

The contract states that the Footprint Power has a right to make a draw on the performance L/C upon the contractor's breach or failure to perform any of its material obligations under the contract.

Material breaches

Footprint Power contends that Iberdrola materially breached the EPC contract. Iberdrola denies that contention and claims to the contrary that it is the owner of the power project that has materially breached the contract.

Iberdrola claims that the project owner forced access to the EPC contractor's project offices and removed property owned by the energy company and that those seizures were not necessary.

Unresolved dispute

On the same day, the Footprint Power notified Iberdrola that in five days' time it would "draw on the full amount" of the US$140.8 million credit issued by Deutsche Bank but was prevented from doing so.

The dispute has already been heard but not resolved by the International Centre for Dispute Resolution.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.