South Korean firm seeks PM’s intervention over stalled $1bn hydropower plans

ISLAMABAD: Korea South-East Power Co. Ltd (KOEN), a state-owned South Korean energy company, has written to Prime Minister Shehbaz Sharif alleging unfair treatment of its planned $1 billion investment in Pakistan after two hydropower projects became stuck in the regulatory process.

In the letter, KOEN chief executive Kim Min Young said the company had been working for around a decade on two run-of-the-river projects on the Swat River in Khyber Pakhtunkhwa, but the schemes had been blocked at the final stage. He said KOEN, a subsidiary of Korea Electric Power Corporation (Kepco), had been developing the 229-megawatt Asrit Kedam project and the 238-megawatt Kalam Asrit project since 2016, with a combined generation capacity of 467MW and an estimated investment of about $1bn. According to the letter, the company has already spent roughly $25 million on the ground.

Kim told the prime minister that the company had complied with the government’s framework by signing a memorandum of understanding with the Khyber Pakhtunkhwa government in 2017, securing letters of intent from the Pakhtunkhwa Energy Development Board (PEDO), and extending performance guarantees repeatedly, most recently until June 2027. He said feasibility studies were completed, both projects were included in the approved Indicative Generation Capacity Expansion Plan (IGCEP) 2022-31, and a generation licence was obtained from the National Electric Power Regulatory Authority (Nepra) in June 2023.

In the letter, Kim said the company had not defaulted on any requirement during the process. He added that while Nepra admitted the tariff petition in June 2023 and held a public hearing on July 17 that year, the proposed tariff has still not been determined. He noted that under Rule 16 of the Nepra Tariff (Standards and Procedure) Rules 1998, a determination should have been issued within four to six months.

Attributing the company’s position, KOEN had pursued the matter through written and in-person follow-up with Nepra. In June 2024, the firm appealed to the Nepra Appellate Tribunal, which on July 23 that year directed the regulator to decide the tariff matter. The company said that order has still not been implemented.

Kim also said the company raised objections when the draft IGCEP 2025-35 removed both projects from the plan. According to him, KOEN placed its objections on record during Nepra’s public hearing, both orally and in writing, and later submitted detailed post-hearing comments in May.

Concern over removal from draft plan

When contacted, a Nepra spokesperson said the projects were not optimised in the IGCEP and were therefore pending consideration. KOEN, however, said the matter had become urgent because the draft IGCEP 2025-35, which does not include the two schemes, is expected to be approved soon despite both projects having been part of IGCEP 2022-31.

The company told the prime minister that approval of the new draft plan without the two projects would leave the proposed $1bn investment stranded for an indefinite period. It was mindful of Pakistan’s current surplus generation capacity and did not want to worsen that situation, adding that it was willing to align the commercial operation date of both plants with the timing of the country’s actual power needs.

In the letter, Kim also referred to engagement by South Korean and Pakistani officials. He said South Korea’s minister for trade had taken up the projects with Pakistan’s commerce minister in April, while a company delegation met the commerce minister on June 30. He added that Pakistan’s foreign ministry had been kept informed throughout and had supported the company.

Kim wrote to the prime minister:

We write to you today with the greatest respect, and with candour, because we no longer know where else to turn.

He further stated, "Every one of these doors received us with courtesy. Not one has produced the decision."

The company also said in its appeal for intervention:

After nearly 10 years of effort, we feel helpless, and we believe the investment is now in real danger.

It was seeking certainty that the tariff would be determined and that the projects would continue to be handled under the Power Generation Policy 2015, which it said was the basis on which it invested.

Separately, Pakistan and South Korea agreed in May to move forward with negotiations on a Comprehensive Economic Partnership Agreement and to strengthen investment cooperation. The understanding was reached during a virtual meeting between Commerce Minister Jam Kamal Khan and his South Korean counterpart Yeo Han-koo. Formal talks on the proposed economic partnership had begun in January 2025 after Jam Kamal and South Korean Trade Minister Inkyo Cheong signed a joint declaration to start negotiations.