The 1,100MW project is to be built on Jhelum river near Muzaffarabad in Azad Kashmir, about 3km downstream of Kohala bridge. The design for the 52-metre dam has been completed by a consortium led by SMEC International which is a partner of Perenia for CDM studies. - File photo

ISLAMABAD: With Pakistan’s efforts to claim carbon credits on clean energy projects from the United Nations in initial stages, the Three Gorges Dam Company of China and a consortium of Japanese and Australian companies have become embroiled in a dispute over consultancy services to secure international awards for 1,100MW Kohala Hydropower Project (KHP) in Azad Kashmir.

If unresolved, the dispute could cause a major setback to Pakistan’s efforts to earn international recognition and clean energy credit benefits following a government decision to build the $2.5 billion project through CWE of China, a subsidiary of the Three Gorges Dam Company.

The Perenia/EGC, a joint venture of Australian SMEC, Pacific Hydro and Mitsui of Japan, entered into a consultancy contract in 2008 with Wapda, the executing agency for the KHP, for clean development mechanism and has already completed the feasibility study that has been registered with the United Nations Framework Convention of Climate Change (UNFCCC) for carbon credits.

Under a decision by President Asif Ali Zardari, the CWE will be the new owner/contractor for the KHP, for its construction in the private sector on build, own, operate and transfer basis.

The Chinese firm has already updated the feasibility study for the project under a letter of intent (LOI) issued by the government.

Sources said that despite objections raised by Wapda that it had already signed an agreement with Perenia Consortium for CDM (which should be transferred in the name of CWE) the Chinese firm has appointed its separate CDM consultants and is striving to get the project registered with the UNFCCC for carbon credits. “This has turned the tide of normal course of action and the outcome … can lead to a clash of interest between CDM consultants hired by Wapda and CWE China… (All this) may not be in the country’s interest,” an official said.

On the other hand, the Perenia consortium has raised legal objections saying its agreement is binding on the government which cannot assign or transfer its rights to any other company. It has also threatened to challenge the decision in international courts.

The 1,100MW project is to be built on Jhelum river near Muzaffarabad in Azad Kashmir, about 3km downstream of Kohala bridge. The design for the 52-metre dam has been completed by a consortium led by SMEC International which is a partner of Perenia for CDM studies.

At present, Pakistan is in different stages of claiming carbon credits on 34 hydropower projects under the Clean Development Mechanism (CDM) of the UNFCCC.

The government has forwarded the cases of 17 major projects to the UNFCCC, validating consultancy reports that these schemes will be helpful in significantly reducing greenhouse gases and hence can qualify for the carbon credits.