ISLAMABAD: The Board of Investment (BoI) has said an investment of $ 3 billion by Korean companies in energy sector is in jeopardy as their under-process projects are not being treated fairly, well-informed sources told Business Recorder.
Jamil Ahmad Qureshi, Director General (Investment Promotion), in a letter to Chairman NEPRA and other concerned officials explained the case of Korean company.
According to BoI, M/s Korea South East Power Company (KOEN), (Pvt) Ltd-Pakistan is the owner and developer of 215 MW Asrit-kedam Hydropower Project and 238 MW Kalam-Asrit Hydropower Project having total investment of about $ 1.0 billion located in Swat.
The Korea Hydro and Nuclear Power Co (KHNP) is the owner and developer of 496 MW lower Spatgah Hydropower project and 350 MW Athmuqam Hydropower project with total investment of $ 2.0 billion.
KOEN and KHNP are the State-Owned Companies (SoCs) and subsidiaries of Korea Electric Power Corporation (KEPCO) who began investing in Pakistan back in 2013 and successfully delivered 102 MW Gulpur Hydropower project, which started operation in 2020.
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The company (KOEN) signed a MoU with Govt. of KPK in May-2017 for the development of 215 MW Asrit-kedam Hydropower Project and LoI for Kalam Asrit Hydropower Project was issued in Apr-2018, while the LoI for Asrit- Kedam Hydropower project was issued in June-2021.
The BoI argued that following the issuance of LoIs Korean company started development work and invested around $ 20 million to conduct feasibility studies, establishment of SPCs, offices & hiring HR. At the time, when KOEN was all set to go to NEPRA in March/Apr-2022 for tariff determination it was observed by the company that Nepra Is not processing the tariff approvals based on the premise that KOEN’S projects are not included in Indicative Generation Capacity Expansion Plan (IGCEP).
“The change in the regime has put all their investment in serious jeopardy. The company is of the view that the inclusion of projects in IGCEP was never a condition of LoI when it took investment decision. This significant change in the regime has shaken their confidence and they are worried about loss of investment and the jobs of local staff,” DG BoI added. The company has requested to declare their projects as “committed project” under IGCEP or exception be given under the power policy as they took investment decision well before the change of regime.
According to BoI, prima facie, the issues being faced by the company seem genuine and are required to be addressed by the Authorities, ie, Ministry of Energy (Power Division), Nepra and NTDC.
The Board of Investment being the apex agency of Government of Pakistan for facilitation of foreign investments proposes that all the stakeholders extend due consideration to the matter and look into the issues of the company under the rules & regulations so that the confidence of Korean investors maybe be restored without hampering bilateral investment relations.
The company’s Branch Manager Yoon, An Sang, in his letter to BoI stated that under the respective LoIs for the projects, KOEN was required to complete the feasibility studies and then approach NEPRA for feasibility stage tariff determination followed by issuance of Tripartite Letter of Support (TIOS) bv PPIB. Relying on the Security Package issued by PPIB (refer clause 3.1.4 of BoI Investment Policy 2013) projects were required to achieve financial close followed by construction start and commercial operations.
KOEN claims that it has already achieved significant progress and is all set to go to Nepra in March/ April 2022 for tariff determination, however, to company’s surprise, it understands that the regulator is not processing the tariff approvals based on the premise that its projects are not included in IGCEP.
The IGCEP recently announced by NTDC wherein number of public sector hydropower projects (about 10,000 MW) and renewable (wind & solar) projects (about 10,000 MW) have been included as “committed projects” while the private sector hydropower projects have been completely ignored.
“Unilateral change in policy and regime by the Government has put all the Korean investment of $ 3 billion in serious jeopardy as inclusion of projects in IGCEP was never the condition of LoI when KOEN took the investment decision,” said company’s Branch Manager.
The Asian Development Bank (ADB) has also shown interest in considering participating-both as a lender and as a minority shareholder in the financing of 215 MW Asrit-Kedam Hydropower Project. However, ADB is of the view that such financing would be dependent upon a number of factors including Bank’s full satisfaction with the project’s financial, economic, environmental, integrity, social, procurement, structural and documentary underpinnings as well as the receipt of all requisite internal approvals and compliance with other guidelines set by the bank.
Copyright Business Recorder, 2022