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Business Recorder
3 days ago
- Business
- Business Recorder
Int'l dispute with Star Hydro: Pakistan govt facing ‘ifs & buts' situation
ISLAMABAD: The government of Pakistan is reportedly facing an ifs and bus situation with respect to international dispute with M/s Star Hydro Power Limited (SHSL), sources in the PPIB told Business Recorder. The issue was reportedly discussed during Finance Minister Senator Muhammad Aurangzeb's visit in April 2025, where he met with Hiroshi Matano, Executive Vice President of the Multilateral Investment Guarantee Agency (MIGA) who emphasized the importance of resolving the matter through negotiation. The Star Hydropower Project is a 147 MW run-of-the-river plant located 120 kms northeast of Islamabad on the Kunhar River. The project operates under a 30-year Build-Own-Operate-Transfer (BOOT) model. MIGA, a member of the World Bank Group, has provided a political risk guarantee to a South Korean equity investor in the project, KDS Hydro Pte. Ltd., against breach of contract by the Government of Pakistan. LCIA trial: Pakistan govt may pursue out-of-court settlement with Star Hydro In April 2024, an arbitration award under the MIGA - covered Government of Pakistan (GoP) guarantee was issued in favor of Star Hydro. Pakistan was given three weeks from April 17, 2024, to fulfill the payment obligations. Failure to pay would allow the investor to initiate enforcement proceedings, and if unsuccessful, MIGA's guarantee holder could file a claim under the breach of contract coverage. The dispute dates back to September 2022 when Star Hydro initiated arbitration under the GoP Guarantee after the National Transmission and Despatch Company (NTDC) — the state-owned power off-taker—refused to honor an earlier arbitration award. That award ordered NTDC to pay significant sums for liquidated damages caused by delays in the project's commercial operation date. The amounts included: (i) Rs. 2.02 billion in delay-related invoices; (ii) $16.45 million in principal damages; (iii) $2.73 million in partial legal costs; and (iv) £51,180 in arbitration costs. These remain unpaid. Under the terms of the MIGA guarantee, Pakistan is obligated to pay the awarded amounts. If it fails to do so within 180 days, MIGA would be required to compensate the investor, creating an international obligation for Pakistan. Notably, MIGA has never had to pay a claim under its breach of contract risk in its history. Should that change, the implications for Pakistan could be significant, both financially and diplomatically. The Finance Ministry is therefore weighing a negotiated settlement to mitigate potential long-term consequences and uphold Pakistan's international financial commitments, the sources added. On August 4, 2025, a meeting on the issue of Start Hydro Power Limited dispute for amicable settlement was held on August 4, 2025 under the chair of Federal Minister for Law & Justice with participation by Federal Minister Energy (Power Division), Attorney General for Pakistan (AG), Secretary Ministry of Energy (Power Division), Secretary Law & Justice, Managing Director, Private Power & Infrastructure Board (PPIB), Chief Executive Officer, Central Power Purchasing Agency Guarantee Limited (CPPA Chief Legal Officer, CPPA, Director General Law, PPIB and Chief Financial Officer, CPPA. Managing Director PPIB, Shah Jahan Mirza gave a detail presentation on the nature of dispute between Star Hydro Power Limited) and National Transmission & Despatch Company recently renamed as National Grid Company (NGC)/CPPA and financial impacts of the claims made by SHPL in all three arbitrations before LCIA and related legal proceedings before Lahore High Court and UK Courts. Other participants of the meeting also gave their respective input into the deliberations. After thorough discussions and deliberations following pertinent decisions were made with consensus: (i) given the status oftheseLCIA arbitrations and related legal proceedings in UK courts,designated officials of Power Division, Ministry of Finance, SIFC, NGC/CPPA and PPIB will immediately engage with SHPL through MIGA's good offices, and negotiate in good faith an amicable settlement of all disputes and officials of International Dispute Unit (IDU), AG office, and Ministry of Law & Justice who will extend all possible support in such negotiations and drafting of Settlement Agreement; (ii) if SHPL agrees, GoP and SHPL may agree to enter into an Agreement for Stay of Proceedings whereby proceeding pending before LCIA will be put on hold the negotiations to be concluded within a specified time period; (iii) if foreign counsel of CPPA/NGC so advises that an Appeal must be filed before Supreme Court of the United Kingdom (UK SC) against the judgment of Court of Appeals which anti-suited NGC/CPPA in relation its application under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 before Lahore High Court, NGC/CPPA as a fallback position will finalize the draft of Appeal and will cause it to be filed on or before22nd August 2025 only in case negotiations with SHPL either fail or remain pending till August 18, 2025. In order to save cost of counsel fee for filing of Appeal before UK SC, NGC/CPPA should engage a counsel who charges relatively lower fee and later if need arises, original counsel may be engaged again for final arguments; and (iv) pending negotiations with SHPL or in case such negotiations fail during the period as agreed under the Agreement for Stay of Proceedings or otherwise, the AG office/PPIB shall continue to take all necessary actions to vigorously defend GoP in both LCIA Arbitrations. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Int'l dispute with Star Hydro: Govt facing ‘ifs & buts' situation
ISLAMABAD: The government of Pakistan is reportedly facing an ifs and bus situation with respect to international dispute with M/s Star Hydro Power Limited (SHSL), sources in the PPIB told Business Recorder. The issue was reportedly discussed during Finance Minister Senator Muhammad Aurangzeb's visit in April 2025, where he met with Hiroshi Matano, Executive Vice President of the Multilateral Investment Guarantee Agency (MIGA) who emphasized the importance of resolving the matter through negotiation. The Star Hydropower Project is a 147 MW run-of-the-river plant located 120 kms northeast of Islamabad on the Kunhar River. The project operates under a 30-year Build-Own-Operate-Transfer (BOOT) model. MIGA, a member of the World Bank Group, has provided a political risk guarantee to a South Korean equity investor in the project, KDS Hydro Pte. Ltd., against breach of contract by the Government of Pakistan. LCIA trial: Pakistan govt may pursue out-of-court settlement with Star Hydro In April 2024, an arbitration award under the MIGA - covered Government of Pakistan (GoP) guarantee was issued in favor of Star Hydro. Pakistan was given three weeks from April 17, 2024, to fulfill the payment obligations. Failure to pay would allow the investor to initiate enforcement proceedings, and if unsuccessful, MIGA's guarantee holder could file a claim under the breach of contract coverage. The dispute dates back to September 2022 when Star Hydro initiated arbitration under the GoP Guarantee after the National Transmission and Despatch Company (NTDC) — the state-owned power off-taker—refused to honor an earlier arbitration award. That award ordered NTDC to pay significant sums for liquidated damages caused by delays in the project's commercial operation date. The amounts included: (i) Rs. 2.02 billion in delay-related invoices; (ii) $16.45 million in principal damages; (iii) $2.73 million in partial legal costs; and (iv) £51,180 in arbitration costs. These remain unpaid. Under the terms of the MIGA guarantee, Pakistan is obligated to pay the awarded amounts. If it fails to do so within 180 days, MIGA would be required to compensate the investor, creating an international obligation for Pakistan. Notably, MIGA has never had to pay a claim under its breach of contract risk in its history. Should that change, the implications for Pakistan could be significant, both financially and diplomatically. The Finance Ministry is therefore weighing a negotiated settlement to mitigate potential long-term consequences and uphold Pakistan's international financial commitments, the sources added. On August 4, 2025, a meeting on the issue of Start Hydro Power Limited dispute for amicable settlement was held on August 4, 2025 under the chair of Federal Minister for Law & Justice with participation by Federal Minister Energy (Power Division), Attorney General for Pakistan (AG), Secretary Ministry of Energy (Power Division), Secretary Law & Justice, Managing Director, Private Power & Infrastructure Board (PPIB), Chief Executive Officer, Central Power Purchasing Agency Guarantee Limited (CPPA Chief Legal Officer, CPPA, Director General Law, PPIB and Chief Financial Officer, CPPA. Managing Director PPIB, Shah Jahan Mirza gave a detail presentation on the nature of dispute between Star Hydro Power Limited) and National Transmission & Despatch Company recently renamed as National Grid Company (NGC)/CPPA and financial impacts of the claims made by SHPL in all three arbitrations before LCIA and related legal proceedings before Lahore High Court and UK Courts. Other participants of the meeting also gave their respective input into the deliberations. After thorough discussions and deliberations following pertinent decisions were made with consensus: (i) given the status oftheseLCIA arbitrations and related legal proceedings in UK courts,designated officials of Power Division, Ministry of Finance, SIFC, NGC/CPPA and PPIB will immediately engage with SHPL through MIGA's good offices, and negotiate in good faith an amicable settlement of all disputes and officials of International Dispute Unit (IDU), AG office, and Ministry of Law & Justice who will extend all possible support in such negotiations and drafting of Settlement Agreement; (ii) if SHPL agrees, GoP and SHPL may agree to enter into an Agreement for Stay of Proceedings whereby proceeding pending before LCIA will be put on hold the negotiations to be concluded within a specified time period; (iii) if foreign counsel of CPPA/NGC so advises that an Appeal must be filed before Supreme Court of the United Kingdom (UK SC) against the judgment of Court of Appeals which anti-suited NGC/CPPA in relation its application under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 before Lahore High Court, NGC/CPPA as a fallback position will finalize the draft of Appeal and will cause it to be filed on or before22nd August 2025 only in case negotiations with SHPL either fail or remain pending till August 18, 2025. In order to save cost of counsel fee for filing of Appeal before UK SC, NGC/CPPA should engage a counsel who charges relatively lower fee and later if need arises, original counsel may be engaged again for final arguments; and (iv) pending negotiations with SHPL or in case such negotiations fail during the period as agreed under the Agreement for Stay of Proceedings or otherwise, the AG office/PPIB shall continue to take all necessary actions to vigorously defend GoP in both LCIA Arbitrations. Copyright Business Recorder, 2025
Business Recorder
01-07-2025
- Business
- Business Recorder
LCIA trial: Pakistan govt may pursue out-of-court settlement with Star Hydro
ISLAMABAD: The government is likely to pursue an out-of-court settlement with the Star Hydropower Project, which initiated arbitration proceedings at the London Court of International Arbitration in October 2024, according to sources in the Finance Ministry. The issue was reportedly discussed during Finance Minister Senator Muhammad Aurangzeb's visit in April 2025, where he met with Hiroshi Matano, Executive Vice President of the Multilateral Investment Guarantee Agency (MIGA). Matano emphasized the importance of resolving the matter through negotiation. The Star Hydropower Project is a 147 MW run-of-the-river plant located 120 kms northeast of Islamabad on the Kunhar River. The project operates under a 30-year Build-Own-Operate-Transfer (BOOT) model. MIGA, a member of the World Bank Group, has provided a political risk guarantee to a South Korean equity investor in the project, KDS Hydro Pte. Ltd., against breach of contract by the Government of Pakistan. Rating upgrade: MIGA mulls $500m trade finance guarantee package Sources said the Finance Ministry has convened a high-level meeting to explore options for an amicable settlement with the power company to avoid further legal and financial complications. In April 2024, an arbitration award under the MIGA - covered Government of Pakistan (GoP) guarantee was issued in favor of Star Hydro. Pakistan was given three weeks from April 17, 2024, to fulfill the payment obligations. Failure to pay would allow the investor to initiate enforcement proceedings, and if unsuccessful, MIGA's guarantee holder could file a claim under the breach of contract coverage. The dispute dates back to September 2022 when Star Hydro initiated arbitration under the GoP Guarantee after the National Transmission and Despatch Company (NTDC) — the state-owned power off-taker—refused to honor an earlier arbitration award. That award ordered NTDC to pay significant sums for liquidated damages caused by delays in the project's commercial operation date. The amounts included: (i) Rs. 2.02 billion in delay-related invoices; (ii) $16.45 million in principal damages; (iii) $2.73 million in partial legal costs; and (iv) £51,180 in arbitration costs. These remain unpaid. Under the terms of the MIGA guarantee, Pakistan is obligated to pay the awarded amounts. If it fails to do so within 180 days, MIGA would be required to compensate the investor, creating an international obligation for Pakistan. Notably, MIGA has never had to pay a claim under its breach of contract risk in its history. Should that change, the implications for Pakistan could be significant, both financially and diplomatically. The Finance Ministry is therefore weighing a negotiated settlement to mitigate potential long-term consequences and uphold Pakistan's international financial commitments, the sources added. Copyright Business Recorder, 2025
Business Recorder
01-07-2025
- Business
- Business Recorder
LCIA trial: Govt may pursue out-of-court settlement with Star Hydro
ISLAMABAD: The government is likely to pursue an out-of-court settlement with the Star Hydropower Project, which initiated arbitration proceedings at the London Court of International Arbitration in October 2024, according to sources in the Finance Ministry. The issue was reportedly discussed during Finance Minister Senator Muhammad Aurangzeb's visit in April 2025, where he met with Hiroshi Matano, Executive Vice President of the Multilateral Investment Guarantee Agency (MIGA). Matano emphasized the importance of resolving the matter through negotiation. The Star Hydropower Project is a 147 MW run-of-the-river plant located 120 kms northeast of Islamabad on the Kunhar River. The project operates under a 30-year Build-Own-Operate-Transfer (BOOT) model. MIGA, a member of the World Bank Group, has provided a political risk guarantee to a South Korean equity investor in the project, KDS Hydro Pte. Ltd., against breach of contract by the Government of Pakistan. Rating upgrade: MIGA mulls $500m trade finance guarantee package Sources said the Finance Ministry has convened a high-level meeting to explore options for an amicable settlement with the power company to avoid further legal and financial complications. In April 2024, an arbitration award under the MIGA - covered Government of Pakistan (GoP) guarantee was issued in favor of Star Hydro. Pakistan was given three weeks from April 17, 2024, to fulfill the payment obligations. Failure to pay would allow the investor to initiate enforcement proceedings, and if unsuccessful, MIGA's guarantee holder could file a claim under the breach of contract coverage. The dispute dates back to September 2022 when Star Hydro initiated arbitration under the GoP Guarantee after the National Transmission and Despatch Company (NTDC) — the state-owned power off-taker—refused to honor an earlier arbitration award. That award ordered NTDC to pay significant sums for liquidated damages caused by delays in the project's commercial operation date. The amounts included: (i) Rs. 2.02 billion in delay-related invoices; (ii) $16.45 million in principal damages; (iii) $2.73 million in partial legal costs; and (iv) £51,180 in arbitration costs. These remain unpaid. Under the terms of the MIGA guarantee, Pakistan is obligated to pay the awarded amounts. If it fails to do so within 180 days, MIGA would be required to compensate the investor, creating an international obligation for Pakistan. Notably, MIGA has never had to pay a claim under its breach of contract risk in its history. Should that change, the implications for Pakistan could be significant, both financially and diplomatically. The Finance Ministry is therefore weighing a negotiated settlement to mitigate potential long-term consequences and uphold Pakistan's international financial commitments, the sources added. Copyright Business Recorder, 2025
