Gwadar power plant: Chinese co CPPCL shows conditional willingness to work

ISLAMABAD: A Chinese company, M/s CIHC Pak Power Company (Pvt) Ltd (CPPCL), has shown willingness to work on a power project at Gwadar in case the proposed 300-MW imported coal-fired project is abandoned by both Pakistani and Chinese governments, well-informed sources in PPIB told Business Recorder.

Sharing the details, sources said PPIB has cited the reference of progress a review meeting regarding 300-MW Gwadar coal power plant of CPEC held under chairmanship of Minister for Planning, Development and Special Initiatives (PD&SI) on September 11, 2024.

It was informed that earlier, CIHC Pak Power Company (Pvt) Ltd (CPPCL) responsible for implementation of 300-MW Gwadar coal power plant was issued Letter of Support (LoS) on August 23, 2019, with Financial Closing (FC) deadline of April 23, 2020.

Gwadar: imported coal-fired project faces axe

However, on account of various issues including notable delays in obtaining acceptable tariff from National Electric Power Regulatory Authority (Nepra), lenders’ reluctance, issuance of Sinosure policy, execution of Land Lease Agreement (LLA) with the government of Balochistan and No-Objection Certificate (NOC) from Balochistan EPA, CPPCL could not achieve the FC.

Accordingly, the PPIB, while facilitating CPPCL, approved six extensions in FC, thereby, extending FC date till December 31, 2024. Nevertheless, despite repeated reminders, the CPPCL has not obtained extension in FC through amendment to its LoS, due to non-submission of FC date extension fee.

According to the PPIB, after groundbreaking of the project in November 2019, the PPIB assisted CPPCL in finalisation of Security Package Agreements (IA, SIA and Quadripartite PPA) which were signed on April 8, 2021, with Required Commercial Operations Date (RCOD) of June 30, 2023.

Upon groundbreaking and signing of Security Package Agreements, it was believed that CPPCL would immediately commence construction activities, in order to achieve COD by June 30, 2023; however, major construction activities on project site were not started by CPPCL.

Afterwards, in order to discuss early start of construction activities at site, a meeting was held in January 2023 between Minister for PD&SI/ Co-Chairman of JCC, Chinese Ambassador and SAPM on Coordination, wherein, it was decided that project work must be started immediately before FC to complete/ energise the project by December 2025.

Consequently, the PPIB held various meetings with CPPCL for resumption of construction at site; however, site activities still remain suspended and no palpable development has been made at project site, since groundbreaking.

Regarding, assistance in obtaining an acceptable tariff, the Government of Pakistan (GoP) also extended its maximum support in tariff determination process.

The Nepra initially determined tariff of 6.6337 cents/kWh for the project in 2018, which was revised thrice in response to review petitions filed by CPPCL.

Latest tariff announced by the NEPRA on May14, 2024 is 9.0818 cents/kWh, which is much higher, as compared to other imported coal power projects developed under CPEC, but CPPCL is still not satisfied and wants further revision in tariff. The CPPCL has so far neither approached the Nepra’s Appellate Tribunal for tariff revision, even after a lapse of more than four months, nor started any major construction activities at site.

In view of the GoP’s efforts to implement the project, the minister for PD&SI during his visit of China in July 2024 discussed delays in construction of the project with officials of NDRC and representatives of CCCG, and clarified that since Nepra has already reviewed tariff for the project thrice, hence it may not be reviewed, any further.

Accordingly, Chinese side and project sponsors were urged to make decision on the project, or propose any alternate project within 15 days. The same was communicated to CPPCL on July 26 and August 5, 2024, with an advice to consult with Chinese authorities, regarding further course of action and provide its feedback.

Response of CPPCL received on August 13, 2024 was not considered satisfactory, since it did not provide any further course of action regarding development of the project.

Later, on August 20, 2024, the minister for PD&SI chaired a CPEC progress review meeting, wherein, he, while discussing the project again desired to seek the CPPCL’s official latest position on implementation of the project.

Accordingly, as per decision of the minister for PD&SI, the CPPCL was approached again to seek their official position, to which, CPPCL replied through letter of September 13, 2024, conveying its stance. The CPPCL, while reiterating its concerns on tariff has requested both the governments to jointly negotiate an alternative proposal, if this power plant is abandoned by all parties.

The CPPCL also communicated its commitment and keenness for development of this strategically-located CPEC coal power plant at Gwadar.

Copyright Business Recorder, 2024