Investors seek third country arbitration: Hydropower projects
By Khaleeq Kiani
ISLAMABAD, Oct 3: International investors have asked Pakistan to provide third country arbitration and sovereign guarantees for $1.6 billion buyer’s credit required for the construction of 969-mw Neelum-Jhelum hydropower projects in Azad Kashmir, it is learnt.
The new conditions had raised many questions in the federal government whether a second attempt to award contract for the development of one of the most strategically crucial projects would be successful to protect Pakistan’s priority rights over river Jhelum, a senior government official told Dawn on Monday.
Technical and financial proposals for the development of the project to be received by October 22 through an international competitive bidding would be opened later this month under the original schedule.
Water and power ministry officials said most of the companies showing interest in the project belonged to China and a few from Europe. So far about 10 companies have indicated to participate in the bidding. Majority of these companies, the officials said, had appealed to the government to replace the condition of providing supplier’s credit of about $1 billion with buyer’s credit.
This would mean, the official said, the investors would be at liberty to arrange financing from a third country for the project instead of directly from the country of a bidder’s origin. In both the cases, he said, the government guarantee would reduce the interest rates.
Similarly, some of these companies have disputed the applicability of the Arbitration Act of 1940 for dispute resolution and demanded a third country arbitration under the aegis of the International Chamber of Commerce and Industry. Under the 1940 arbitration act, settlement of claims and disputes are to be made in Lahore, which is not acceptable to the foreign investors.
The project is of a unique nature technically. About 98 per cent of the project structure would be underground, including a 41-km tunnel, power house and transmission system, and the remaining two per cent i.e. inlet and outlet of the water tunnel could be seen on the ground. The tunnel would be about 300 meter below the river bed.
The government had earlier extended the bidding date for the project form May 31 to October 22 owing to a poor response from the bidders and their conditional bids.
The project is of strategic national importance because it could protect Pakistan’s priority rights over Neelum waters, besides providing cheap hydel electricity to the system.
The tenders for the international competitive bidding of the project are related to civil works, mechanical works, hydraulic steel works and electrical works and required to be based on supplier’s credit.
India is constructing a hydropower and water storage project, Kishanganga, on the same river upstream and Pakistan considers it a violation of the Indus Waters Treaty of 1960. A Pakistani team would hold negotiations with the Indian government next month to stop the Kishanganga project. India has already completed 75 per cent of a 22-km tunnel of the project.
If the project is not started immediately, Pakistan would be obliged under the 1960 Indus Waters Treaty to allow India divert Neelum waters for power generation that would compromise Pakistan’s priority rights over the river.
Under the design, the intake of the project would be from Neelum river at Nauseri, 42-km east of Muzaffarabad, and its outlet and power house would be located at 22-km downstream of Muzaffarabad. The two points would be connected through a 41-km tunnel that would cross underneath the river bed of Jhelum.
