South Korean firm alleges unfair delays on $1B Pakistan hydropower investment
Korea South-East Power Co. Ltd (KOEN), a state-owned South Korean energy company, has formally appealed to Pakistan's Prime Minister Shehbaz Sharif regarding what it describes as "unfair stonewalling" of its $1 billion investment plans. KOEN has been developing two run-of-the-river hydropower projects on the Swat River in Khyber Pakhtunkhwa since 2016, with a combined generation capacity of 467 megawatts. These projects, the 229MW Asrit Kedam and the 238MW Kalam Asrit, represent a significant investment, with the company having already spent approximately $25 million on-site. KOEN asserts it has met all regulatory requirements, including signing an MoU with the provincial government in 2017, obtaining letters of intent, securing a generation license from Nepra in June 2023, and having its projects included in the Indicative Generation Capacity Expansion Plan (IGCEP) 2022-31. However, the company claims the determination of the projects' tariff has been inexplicably delayed for nearly three years since the public hearing in July 2023, despite a regulatory timeframe of four to six months. Even an appeal to the Nepra Appellate Tribunal in June 2024, which directed Nepra to decide the tariff, has reportedly gone unimplemented for nearly two years. The situation has become urgent as the draft IGCEP 2025-35 excludes these projects, potentially stranding the $1 billion investment indefinitely. KOEN is seeking certainty that its tariff will be determined and its projects treated under the Power Generation Policy 2015, under which they initially invested in good faith.
This situation highlights potential systemic friction in Pakistan's regulatory environment, impacting foreign direct investment. The protracted delay in tariff determination, despite KOEN's adherence to established procedures and a decade of effort, suggests possible bureaucratic inertia or unstated policy shifts. The exclusion of previously approved projects from the updated IGCEP raises questions about the predictability and stability of Pakistan's energy sector planning. While the government seeks to attract foreign investment, as evidenced by ongoing CEPA negotiations with South Korea, such prolonged procedural roadblocks can deter future investors by signaling elevated risk and uncertainty. This case underscores the critical need for transparent, efficient, and predictable regulatory processes to foster investor confidence and facilitate the realization of significant infrastructure projects crucial for national development.
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