ISLAMABAD: The government is weighing an amicable settlement in its long-running dispute with M/s Star Hydro Power Limited (SHPL) to avoid a potentially costly and diplomatically sensitive breach of contract claim under a World Bank guarantee, according to sources in the Private Power and Infrastructure Board (PPIB).
The 147MW run-of-the-river project on the Kunhar River, operating under a 30-year BOOT model, is backed by the Multilateral Investment Guarantee Agency (MIGA) against political risk for South Korean investor KDS Hydro Pte. Ltd. The conflict stems from the National Transmission and Despatch Company’s (NTDC, now National Grid Company) refusal to honour a prior arbitration award over project delays, which directed NTDC to pay Rs2.02bn in invoices, \$16.45m in damages, \$2.73m in partial legal costs, and £51,180 in arbitration costs. These remain unpaid.
In April 2024, an arbitration ruling under the MIGA-covered GoP guarantee sided with SHPL, giving Pakistan three weeks to comply. Failure to pay could trigger enforcement proceedings and, ultimately, a MIGA payout — a first in the agency’s history. Officials warn this would harm Pakistan’s international standing.
At a high-level meeting on August 4, 2025, chaired by the Law Minister, officials from the Power Division, Finance Ministry, PPIB, CPPA, and Attorney General’s Office agreed to engage SHPL through MIGA to negotiate a settlement, potentially staying arbitration proceedings during talks. As a fallback, CPPA/NGC may appeal to the UK Supreme Court if negotiations fail or stall by August 18.
The government aims to conclude negotiations swiftly to contain financial exposure, safeguard international commitments, and prevent long-term reputational damage.
Story by Mushtaq Ghumman
