Unfair Treatment of Power Projects Puts $3 Billion Korean Investment in Jeopardy

Investment of $3 billion by Korean companies in the power sector is potentially at risk of falling apart due to unfair treatment of their under-process power projects.

According to Business Recorder, the Director-General Investment Promotion for the Board of Investment (BoI), Jamil Ahmad Qureshi, made the daunting revelation in a letter addressed to the Chairman National Electric Power Regulatory Authority (NEPRA) and other officials.

According to the letter, M/s Korea South East Power Company (KOEN) (Pvt) Ltd-Pakistan is the owner and developer of the $1 billion 215 MW Asrit-Kedam Hydropower and the 238 MW Kalam-Asrit Hydropower projects, located in Swat. Similarly, the Korea Hydro and Nuclear Power Co. (KHNP) is the owner and developer of the 496 MW lower Spatgah Hydropower and the 350 MW Athmuqam Hydropower projects worth $2 billion.

DG Qureshi explained that after the letters of Intent (LoIs) were issued for the above-mentioned projects, KOEN initially committed roughly $20 million for development. However, when the Korean company was getting ready to go to NEPRA in March/April 2022 for tariff determination, the business noticed that the energy regulator was not processing tariff clearances since KOEN’s projects were not included in the Indicative Generation Capacity Expansion Plan (IGCEP).

The BoI official said, “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 decisions. This significant change in the regime has shaken their confidence and they are worried about the loss of investment and the jobs of local staff.”

He added that the Korean enterprise has solicited that their projects be declared “committed projects” under the IGCEP or that an exception is granted under the power policy because they made their investment choice before the regime transition.

In principle, the BoI has determined that the company’s problems appear to be genuine and should be addressed by the Ministry of Energy, NEPRA, and other concerned authorities. It also recommends that all stakeholders give the matter due consideration and investigate the company’s issues in accordance with the rules and regulations so that Korean investors’ confidence can be restored without jeopardizing bilateral investment relations.