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Saturday August 20, 2022

Korean firm moves arbitration court against Pakistan

Korean investors have moved London Court of International Arbitration seeking $94 million as compensation

June 27, 2022
Patrind Hydro Power Project is operational since November 2017. Picture Star Hydro Power Limited (SHPL)
Patrind Hydro Power Project is operational since November 2017. Picture Star Hydro Power Limited (SHPL)

ISLAMABAD: In the wake of no required action by PTI government to resolve the issue of inclusion of escalated cost in true-up tariff, Korean investors have moved London Court of International Arbitration (LCIA) against the government of Pakistan seeking $94 million (Rs19.6 billion) as compensation. 

The Korean investors pleaded National Transmission & Despatch Company (NTDC) failed to evacuate electricity from 147MW Patrind Hydropower Project for at least six months from the COD of the project and also the cost incurred on construction of a point from where the electricity was to be delivered to the national grid, one of the top men of Power Division confirmed to The News.

According to the officials, Power Division under Federal Minister for Power Khurram Dastgir smelt a rate and decided to fix the racket of unscrupulous officials of NTDC, CPPA and Power Division responsible for not evacuating electricity from the project on time and raising no objection to a Korean company which set up a delivery point that NTDC didn’t desire as it wanted to evacuate electricity from another point.

However, the delivery point, which was not desired by NTDC, was constructed by a Korean company – Star Hydro Power Limited (SHPL) – caused an increase in the cost of project not reflected in the true-up of the electricity being generated by the Patrind Hydropower Project. 

The official said investigation shows NTDC didn’t raise any objection when the Korean company constructed the electricity delivery point which the state-owned entity didn’t want.

NTDC is currently dealing with transmission projects worth Rs421 billion.

“We have removed a joint secretary who allegedly developed vested interests with NTDC for various projects”, the official said. 

“There are reports the same racket will launch some officials who will represent NTDC in LCIA and will give technical input in the case not up to the mark ensuring the government of Pakistan loses the case and in return they will manage some “commission” in British pounds,” senior officials in Power Division confided to The News. “We will keep a vigilant eye on the case proceedings”, they said. 

When Shehbaz Sharif, they said, took charge as Prime Minister, this matter was brought before him. He constituted a committee to find out ways for out-of-court settlement arguing that record of the government shows it gets defeated in arbitration most of the time.

This scribe sent questions to NTDC, PPIB (Private Power Infrastructure Board) asking as to why the Korean company which built Patrind Hydropower Power plant moved LCIA and why NTDC failed to evacuate electricity on time. Both the departments did not respond.

To a question, the official said SHPL is an Independent Power Producer (IPP). It has invested in, and developed 147MW run-of-river Patrind Hydropower Project on River Kunhar near village Patrind, District Muzaffarabad of Azad Jammu & Kashmir (AJ&K). The project is generating electricity for Pakistan's National Grid. The project has been developed under the government's Policy for Power Generation Projects 2002 on BOOT basis with a concession period of 30 years. SHPL was incorporated in April 2006 as a public limited company to develop and implement the project. Korea Water Resource Corporation (K-water) and Daewoo Engineering & Construction Company are the sponsors of SHPL and have acquired 100pc shareholding in the company through Singapore-based investment vehicle, KDS Hydro.

Patrind Hydro Power Project is operational since November 2017. Hydropower projects, under 2002 policy read with Nepra’s Mechanism for Determination of Tariff Hydropower Projects, have three-tier cost-plus tariff determination process i.e. Feasibility Stage, EPC Stage and COD Stage true-up.

The project company, through CPPA-G, submitted a petition before Nepra’s determination of COD stage tariff with a total cost of $420.127 million. Nepra, however, approved the COD stage tariff on July 29, 2020 with a total cost of $ 326.261 million. The company filed a review petition before Nepra on August 28, 2020 which is pending till date.

Meanwhile, the company served a notice of dispute dated March 31, 2021 on GOP through PPIB under Section 16.1 of the GOP IA on November 30, 2011.

The company alleged the tariff determinations are discriminatory and a breach of Section 12.2 of the GOP IA. A committee has been constituted comprising representatives from Power Division, Law Division, IDU AG Office, MoF, MoFA, CPPAG, NTDC and PPIB to proceed in the matter.

Attorney General (AG) Office is finalising a future course of action. Pakistan now wants out-of-court settlement as the authorities think the case of NTDC and PPIB is weak. 

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