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Karkey Rental Power Dispute Resolved: Imran Khan

by Newsweek Pakistan
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Prime minister says Pakistan no longer has to pay the $1.2 billion penalty imposed on it for breach of contract

Prime Minister Imran Khan on Monday announced on Twitter that the Karkey rental power dispute has been ‘amicably resolved,’ saving Pakistan from paying the $1.2 billion penalty imposed on it for breach of contract.

“I want to congratulate the government’s negotiating team for doing an excellent job in achieving this,” P.M. Khan said, adding that Turkey President Recep Tayyip Erdogan had helped resolve the issue and prevent the hefty penalty imposed by the International Center for Settlement of Investment Disputes in August 2017.

He did not offer any details on what the new settlement entailed. Attorney General of Pakistan Anwar Mansoor Khan told daily Express Tribune that a formal agreement verifying the settlement had yet to be signed, but would soon be formalized in Turkey.

Karkey Karadeniz Elektrik Uretim (KKEU) was one of 12 rental power projects undertaken by the Pakistan Peoples Party-led government in 2008 to resolve the country’s crippling power crisis. In 2011, the Turkish company brought a ship to Karachi to provide electricity to the national grid but the plant was unable to produce the 231MW of power required under the agreement, which prompted the government to demand a refund for advance payments.

In 2012, the Iftikhar Chaudhry-led Supreme Court took suo motu notice of the rental power projects, and ruled all such agreements ‘illegal.’ It also ordered the National Accountability Bureau to initiate a probe into the projects. The anti-corruption watchdog barred Karkey’s ship from leaving Pakistan’s waters until the investigation was completed. The ship was kept stalled for nearly 16 months, causing losses to Karkey, which it sought to resolve via international arbitration.

The ICSID award announced in 2017 held that Pakistan should pay damages over $800 million, along with $5.6 million per month as interest to Karkey.

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