ISLAMABAD: South Korean company, Korea Hydro & Nuclear Power Co., Ltd (KHNP), which is developing a hydropower project in Khyber Pakhtunkhwa (KP), has pressed the Minister for Power, Sardar Awais Ahmad Khan Leghari, to remove obstacles in establishment of project, already two years behind schedule.
M/s KHNP, government-owned enterprise of South Korea, has been developing the 470-MW Lower Spat Gah (LSG) Hydropower in Public-Private Partnership (PPP) mode in KP province as per the MoU between KHNP and GoKP in 2018 and this Foreign Direct Investment is in place already.
The Letter of Intent (LoI) originating from the MoU was issued by Pakhtunkhwa Energy Development Organization (PEDO), on behalf of GoKP, in 2021. The entire project award process was duly endorsed by the Cabinet of GoKP in 2021. In the LoI, following obligations were imposed on the sponsor: (i) carry out a bankable feasibility study (F/S) at its cost in accordance with the Terms of reference provided; (ii) complete F/S stage tariff petition to Nepra in accordance with Nepra’s mechanism for determination of tariff for hydropower projects; and (iii) obtain the generation licence.
According to the CEO of the Company, as obligated by the LoI, KHNP completed the Bankable Feasibility Study (F/S) in 2022 and further fulfilled subsequent obligations; i.e., F/S tariff petition and application of generation licence and obtained various NOCs from EPA, Forest and IRSA. However, these obligations have been halted by the concerned entity since the project is not included in the IGCEP which cannot be considered as the conditions of above mentioned obligations have not been met.
Even though the project company has explained conflicts between the policy and regulation to the concerned entities and explained to them that the project shall be developed without inclusion in the IGCEP as the LOI was issued prior to the promulgation of any other new market regulations such as National Electricity Plan (NEP) 2021 and Nepra Electric Power Procurement Regulation (NEPPR) 2022 and CTBCM mode, the concerned entities did not acknowledge these material breaches that jeopardise the fate of the project, CEO Seung Yeol Lim added.
The company in its letter stated that to resolve this issue, the project company, together with the legal partner, reviewed legal frameworks from the starting point of development till date. As a result, it is advised that there are obviously material breaches among the policies and regulations of Pakistan, and the policies and regulations available at the timing of the LOI issuance shall be applied to the Project. The legal opinion by the legal partner is summarised as follows: (i) the Project is governed by LOI issued and Power Policy 2015, which are in full force and effect, having been duly approved by the Council of Common Interest (CCI) prior to the promulgation of any other new market regulations; (ii) inclusion in the IGCEP is not required as the procurement of the project commenced prior to its enactment of NEP 2021 and NEPPR 2022. There is no obligation to include the project in the IGCEP based on least cost criteria; and (iii) cost-plus Tariff Regime for the Project shall be applied in accordance with the LoI and Power Policy 2015.
Copyright Business Recorder, 2024
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