Korean investors take Pakistan govt to London arbitration court over escalating costs of Patrind Hydropower project
Jun 27, 2022
Islamabad [Pakistan], June 27 : Korean investors on Monday filed a claim with the London Court of International Arbitration (LCIA) against the government of Pakistan over escalating costs of the Patrind Hydropower project.
Korean investors filed a claim with LCIA against the government of Pakistan, seeking USD 94 million (Rs 19.6 billion) in compensation, reported Geo News.
The issue came up after Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) government had failed to include escalating costs in true-up tariffs.
National Transmission and Despatch Company (NTDC) is currently dealing with transmission projects totalling Rs 421 billion.
The Korean investors claimed that NTDC failed to evacuate electricity from the 147-megawatt Patrind Hydropower project for at least six months after the project's COD, as well as the cost of constructing a point from which the electricity was to be delivered to the national grid, according to a top official of the power division, reported Geo News.
According to the Pakistan power division official, the investigation shows that NTDC did not object when the Korean company, Star Hydro Power Limited (SHPL) built the electricity delivery point that the state-owned entity did not want which led to increasing costs in the project.
As per Geo News, when Shehbaz Sharif became Prime Minister, this matter was brought before him. He formed a committee to investigate out-of-court settlement options, arguing that the government's track record shows that it is frequently defeated in arbitration.
A power division scribe wrote to NTDC and the PPIB (Private Power Infrastructure Board) asking why the Korean company that built the Patrind Hydropower Plant relocated LCIA and why NTDC failed to evacuate electricity on time. Both departments remained silent.
In response to a question, the official stated that SHPL is an Independent Power Producer (IPP). It has invested in and developed the 147MW run-of-river Patrind Hydropower project on the Kunhar River near the village of Patrind in the Pakistan-occupied Kashmir district of Muzaffarabad.
The project generates power for Pakistan's national grid. The project was developed on a BOOT basis under the government's Policy for Power Generation Projects 2002, with a 30-year concession period.
SHPL was formed as a public limited company in April 2006 to develop and implement the project. SHPL's sponsors are Korea Water Resource Corporation (K-water) and Daewoo Engineering & Construction Company, which have acquired a 100 per cent stake in the company through the Singapore-based investment vehicle KDS Hydro.
The Patrind Hydro Power Project has been in operation since November 2017. Hydropower projects have a three-tier cost-plus tariff determination process under the 2002 policy read with Nepra's Mechanism for Determination of Tariff Hydropower Projects, namely the Feasibility Stage, EPC Stage, and COD Stage true-up.
A future course of action is being finalised by the attorney general's Office. Pakistan now prefers an out-of-court settlement because the authorities believe the NTDC and PPIB cases are weak, reported Geo News.
