ISLAMABAD: The Ministry of Foreign Affairs (MoFA) and the Power Division are currently at odds over the stalled hydropower projects of the Korean company, M/s KOEN. The Power Division argues that, since it did not issue a Letter of Support (LoS) for the company’s projects, it is not responsible for the financial losses incurred by KOEN. In contrast, MoFA, which is receiving communications from the Pakistani Ambassador to Korea and the Korean Embassy in Islamabad, is urging the Power Division to resolve the issue amicably.
According to KOEN, the primary issue in this dispute is the power regulator, NEPRA, which has not issued determinations on the projects. MoFA has cited communications from Pakistan’s Ambassador in Seoul, who has conveyed the Korean government’s concerns regarding the treatment of KOEN in Pakistan.
The South-East Power Company of Korea has once again raised concerns about its 238 MW Kalam-Asrit Hydropower Project and 229 MW AsrilKadam Hydropower Project with the Pakistani Mission in Seoul. MoFA believes that since these projects involve renewable energy sources and the company has already invested a substantial amount, it is important to engage with KOEN and reach an amicable solution, even if the projected power generation might exceed Pakistan’s future energy needs.
The Power Division has been urged once again to resolve this issue promptly to avoid potential negative impacts on future investments in Pakistan. KOEN, which is struggling to revive its projects, has stated that it could bring a substantial $1 billion investment to Pakistan’s energy sector through these two hydropower projects. However, despite its commitment and fulfillment of all regulatory requirements, NEPRA has delayed tariff determinations for over 26 months, causing significant financial losses to the company.
“This unwarranted delay not only jeopardizes KOEN’s significant investment but also sends a damaging message to global investors about the unpredictability of Pakistan’s investment climate,” the company stated in a letter to Senator Mohsin Aziz, Chairman of the Senate Standing Committee on Power.
KOEN asserts that its engagement with the issuance of Letters of Intent (LoIs) by the Government of Khyber Pakhtunkhwa since 2018 has formally recognized the potential of these projects. Since receiving the LoIs, KOEN has diligently adhered to all regulatory and procedural requirements, completing all tasks within the timelines outlined in the power policy and the LoIs. The company claims it has no outstanding obligations.
“Despite KOEN’s compliance with regulatory requirements, our projects have faced significant delays since the feasibility study in April 2022. From that point, KOEN’s team, which includes experienced Korean management and skilled local experts, has been largely inactive due to NEPRA’s reluctance to proceed with the tariff determination,” the company said. Initially, the tariff was delayed due to the exclusion of its projects from the first IGCEP version (2021-30) for seven months.
KOEN accepted this setback and agreed to wait for the subsequent IGCEP iteration (2022-31), where its projects were included as optimized. However, NEPRA has continued to withhold the tariff determination, citing the possibility of the projects not being optimized in the forthcoming IGCEP (2024-34). This prolonged uncertainty has resulted in approximately $25 million in expenditure with no tangible progress on the projects.
KOEN has called on NEPRA to set tariffs for its hydropower projects under the Power Policy 2015 and emphasizes that the Government of Pakistan (GoP) and its regulatory bodies must uphold the integrity of their policies.
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