‘Unfriendly treatment’ being meted out to S. Korean firms: Pakistan’s envoy unhappy with ministries

ISLAMABAD: Pakistan’s ambassador to South Korea is reportedly unhappy with the ministries for their unfriendly treatment to Korean companies, which has resulted in the award of billions of rupees against Islamabad, well-informed sources in the Ministry of Foreign Affairs told Business Recorder.

Recently, the Ministry of Foreign Affairs has informed the concerned ministries that Pakistan’s ambassador in Seoul met K-Water, a Korean energy conglomerate and discussed the government of Pakistan’s dispute with Star Hydropower Limited (its subsidiary), the sources added.

According to the Ministry of Foreign Affairs, the background of the case involves K-Water and Daewoo E&C investing in Star Hydropower Project Limited (SHPL) in Pakistan to build a 147 MW Patrind Hydropower Project in Muzaffarabad.

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However, there have been three instances where SHPL has resorted to arbitration; (i) against National Transmission and Despatch Company (NTDC), at the London Court of International Arbitration (LCIA), in December 2020 for not evacuating electricity from the hydropower project and losses faced by Korean investors.

The decision was an award of Rs 7.4 billion against NTDC; (ii) against the Government of Pakistan, a Multilateral Investment Guarantee Agency (MIGA) because Pakistan rejected its call for a guarantee in paying award money under first arbitration; and (iii) against NEPRA, again in LCIA, on tariff adjustments which will be decided in June 2024.

Most of the issues are related to the Private Power & Infrastructure Board (PPIB), Central Power Purchasing Agency –Guaranteed (CPP-G), National Transmission and Despatch Company (NTDC) and National Transmission and Despatch Company (NTDC).

The Ministry of Foreign Affairs has further stated that in the last meeting held between K-Water and the Mission of Pakistan in Seoul, they showed willingness to negotiate but after the outcome of the second arbitration by LCIA (June 2024), fearing that a binding award in its decision can result in a major risk of financial obligation on Pakistan.

“Our ambassador in Seoul has recommended that the relevant ministries may look into this problem and solve it at the earliest in order to avoid a major financial obligation and to keep a friendly environment for investment in Pakistan,” the sources quoted the Ministry of Foreign Affairs as conveying the concerned ministries.

Korean companies working on hydropower projects in Pakistan are running pillar to post including the Prime Minister’s Office (PMO) for resolution of their issues but issues are still unresolved.

However, the PPIB has proposed that pipeline hydropower projects who filed tariff petition prior to the promulgation of the NEPRA (Electric Power Procurement) Regulations, 2022, and prior to the required date of CTBCM implementation under the NEPRA Act, ie, April 30, 2023, should be excluded from the application of the NEPRA (Electric Power Procurement) Regulations, 2022.

Managing Director Shah Jahan Mirza, in a letter to the Power Division, has made reference to the Power Division’s memorandum of March 21, 2024, along with a copy of the Prime Minister’s Office U.O of March 15, 2024, attached with a copy of Korea South-East Power Co Ltd (KOEN)’s of March 11, 2024, regarding the matter titled, foreign direct investment $1 billion) - 238 MW Kalam–Asrit hydropower project and 229 MW Asrit-Kedam hydropower project.

Copyright Business Recorder, 2024