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Damages Assessment in A Renewable Energy Breach of Contract Dispute: FSG vs Kingdom of Lesotho

The Kingdom of Lesotho (“Lesotho”) was found to have breached provisions of a supply agreement with a German renewables company, Frazer Solar GmbH (“FSG”), in an arbitration heard in South Africa. FTI Consulting’s quantum experts, Henry Pannell and Liberty Mncube, were appointed on behalf of the Claimant (FSG) to provide an independent assessment of FSG’s damages resulting from the breach.

THE SITUATION

FSG signed a supply agreement with Lesotho in 2018 to provide up to 40,000 solar water heating systems, 350,000 solar lanterns, 1.5 million LED lights and some solar photovoltaic capacity, nationwide.

The project was expected to have significant benefits for the country, to transform access to clean, renewable energy, replacing the use of polluting and expensive alternatives. It was to be financed by the German government, with the loan structured to ensure that Lesotho benefited financially, with self-funding loan repayments through significant short- and long-term electricity cost savings.

Despite the supply agreement being signed, the project did not proceed. FSG claimed that Lesotho had materially breached the provisions of the agreement and suffered significant damages as a result.

OUR ROLE

FTI Consulting’s experts, Henry Pannell and Liberty Mncube, were instructed to provide an independent assessment of FSG’s damages. The key issues we were asked to consider were:

the economic rationale for the project;
the quantification of losses FSG incurred as a result of the breach of the agreement; and
pre-award interest

FTI Consulting experts prepared an expert report and gave oral testimony at a hearing in Johannesburg. The FTI Consulting team included Laurie Binge and Willem van Lill.