ISLAMABAD: The Private Power & Infrastructure Board (PPIB) has agreed to grant extension in the milestones of the Letter of Interest (LoI) of 640-MW Mahl Hydropower project from April 2, 2023 to December 31, 2024 on the basis of single performance guarantee with some conditions, well informed sources told Business Recorder.
The project is located on River Jhelum at boundary among AJ&K, Punjab and Khyber Pakhtunkhwa, and is being developed by Mahl Power Company (Pvt.) Limited under the provisions of Policy for Power Generation Projects 2002. China Three Gorges South Asia Investment Ltd (CSAIL) is the main sponsor of the Project Company.
Sharing the details sources said that PPIB issued LoI to the Project Company on October 21, 2014 for conduct of feasibility study and developing the project.
Under the LoI, Project Company was required to (i) complete bankable feasibility study within stipulated time; (ii) submit the feasibility stage tariff proposal to NEPRA through Power Purchaser within sixty days after approval of the feasibility study by Panel of Experts (PoE); and (iii) obtain the Letter of Support (LoS) from PPIB within sixty days after determination of feasibility stage tariff by NEPRA.
The Company completed the feasibility study of the project which was approved by POE on January 2, 2017. Subsequently, feasibility stage tariff was determined by NEPRA on January 23, 2019. After determination of feasibility stage tariff, PPIB in a letter of April 15, 2019 advised the Project Company to fulfil pre-requisites for LoS issuance; however, in the meantime, the Project Company filed Motion for Leave for Review (MLR) before NEPRA on the tariff determination which was decided by NEPRA on October 31, 2019. 5.
Meanwhile, Indicative Generation Capacity Expansion Plan (IGCEP) was under formulation process; hence, further processing, i.e., issuance of LoS was paused inter-alia for the Project in light of the Power Purchaser/ CPPA-G letter of November 5, 2019 addressed to PPIB, that “PPIB may please hold to proceed further in the subject matter till IGCEP be approved by NEPRA then accordingly as per the regulatory framework, it would be cleared for all the stakeholders to proceed in the subject matter”.
Further in the LoI it is provided that “in case the sponsors or the Project Company default, delay or fail to apply to PPIB for issuance of LoS within the stipulated time, the Project shall stand cancelled automatically.
Accordingly, to extend the timeline of the milestone of the LoI, i.e., the obligation of the Sponsors to apply to PPIB for LoS, the matter was considered by the PPIB Board in its 127th meeting held on June 1, 2020 wherein the Board allowed extension in the timeline of relevant milestones and validity of LoIs for 640-MW Mahl, 450-MW Athmuqam, and 82.25-MW Turtonas Uzghor HPPs for an appropriate time to accommodate the timeframe of the project development, on a case to case basis, as per the time line described in the Indicative Capacity Expansion Plan (IGCEP) when approved by NEPRA.
Board further directed that such extensions in the LoIs may be granted subject to extension in the existing bank guarantees (without doubling) by the respective sponsors/ companies with one-time exemption/waiver of the applicable LoI extension fee.”
The Board authorized PPIB to initiate required amendment(s) in the PPIB (Fee and Charges) Rules 2018 to for Gazette Notification to provide such waiver/ exemption. IGCEP 2021-30 approved by NEPRA on September 24, 2021 did not include Mahl HPP in list of committed projects; hence, the project could not be moved ahead.
However, IGCEP 2022-31 approved by NEPRA on 1st February 2023 has included Mahl HPP as optimized project with its Commercial Operation Date (COD) as July 2030. If 60 days’ time period as mentioned in the LoI to apply to PPIB for LoS is considered from the approval of the IGCEP, in line with the decision of 127th meeting of the Board, the Company was required to apply to PPIB for LoS till April 2, 2023.
The PPIB Board and in the context of awaited inclusion of the Project in approved IGCEP, the bank guarantee was extended by the Project Company from time to time which is valid till March 31, 2025.
Subsequent to the approval of IGCEP 2022-31, PPIB in its letter February 23, 2023 while mentioning relevant terms of LoI, COD requirement of IGCEP, availability of tax exemption up to June 30, 2023 under 2nd Schedule of Income Tax Ordinance 2001 etc. advised the Project Company to fulfil pre-requisites for obtaining LoS.
In response Project Company in its letter dated March14, 2023 submitted its request for LoI extension of two years (i.e. up to December 31 2024) instead of getting LoS.
After going through the issues mentioned by the Project Company, PPIB’s Projects’ Committee has recommended extension in the milestones of the LoI of 640-MW Mahl Hydropower Project from April 2, 2023 to December 31, 2024 on the basis of single performance guarantee subject to the followings: (i) the Project Company shall keep the Bank Guarantee valid for three months beyond the allowed period of extension of the LoI; (ii) the timeline for the Project Company to get LoS from PPIB will stand extended till the extended time line of the LoI; (iii)the COD of the Project in the next iteration of the IGCEP will be delayed according to the extended LoI period; and (iv) the Company shall pay the LoI extension fee applicable under PPIB (Fee and Charges) Rules.
The PPIB Board, in its next meeting will accord extension to LoI of the project till December 31, 2024.
Copyright Business Recorder, 2023
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