Germany has requested the intervention of Pakistan’s Chief of Army Staff General Asim Munir to reevaluate a fair settlement agreement related to the closure of a 450MW Rousch Power Pakistan Limited (RPPL) in which German firm Siemens owns a 26% stake.
Express Tribune reported, citing sources from the Ministry of Energy, that German Ambassador to Pakistan Alfred Grannas wrote a letter to the Army chief addressing concerns after Siemens was allegedly forced to agree to a settlement for handing the power plant over to the government.
Despite Pakistani officials claiming the agreement was mutually negotiated, the German side perceives it as coerced.
The envoy wrote that Germany is open to contract termination but insists on meeting six specific conditions to facilitate a fair conclusion. He asked for COAS’s involvement to resolve the matter that is hurting both local and foreign investors’ confidence.
The contentious settlement requires the power plant to be handed over to the Pakistani government for one dollar, with Siemens to receive Rs5.5 billion for early contract termination and an additional Rs2.8 billion for maintaining the plant until its transfer.
Germany’s proposed amendments include financial assurances from Pakistani authorities ensuring the transfer of all related funds to German bank accounts, including dividends and settlement payments. They also demand a resolution to an ongoing sales tax dispute and the cessation of all legal actions against the plant.
Furthermore, Siemens is asking for indemnity for its board members and shareholders against any future claims or taxes related to the project and its termination. The company also seeks immediate transfer of Rs3.1 billion in dividend arrears to Germany as a gesture of good faith.
Earlier, Georg Klussmann, the Head of the Division for Pakistan at the German Federal Foreign Office, voiced concerns through communications with Pakistan’s Embassy in Germany about how negotiations were handled with RPPL, particularly regarding Siemens’ stake in the agreement.
This ongoing dispute not only affects the bilateral trade relations between Pakistan and Germany but also highlights the broader concerns of foreign investors regarding policy stability and regulatory practices in Pakistan.
The government’s broader plan to terminate additional power plant contracts adds to the uncertainty, raising alarm among the international investment community.
