Gwadar coal-fired power plant: PPIB extends financial closing date

ISLAMABAD: The Board of Private Power & Infrastructure Board (PPIB) has extended the Financial Closing (FC) date of 300 MW Gwadar coal-fired power plant till December 31, 2024, with some conditions.

The PPIB is processing a 300 MW coal power project at Gwadar, being developed by CIHC Pak Power Company (Pvt) Limited (CPPCL). This project is on the “priority list” of the China-Pakistan Economic Corridor (CPEC) and holds paramount importance for the energy infrastructure and economic development of the region.

The PPIB Board was informed that after issuance of Letter of Support (LoS) on August 23, 2019, the CPPCL was given the target of Financial Closing (FC) by April 23, 2020. Thereafter, the CPPCL signed Security Package Agreements (IA, PPA, SIA) on April 8, 2021, with Commercial Operations Date (COD) of June 30, 2023. CPPCL started construction at site before FC in 2019. However due to Covid-19 and delays in obtaining acceptable tariff from Nepra, lenders’ reluctance and issuance of Sinosure policy, the CPPCL could not achieve FC by the deadline and suspended on-site project activities. Consequently, at the request of CPPCL two extensions in FC date were accorded by PPIB, last of which expired on January 31, 2022.

PPIB may extend FC date of Gwadar power plant today

The PPIB maintained that in order to devise a road map for early implementation of project, various meetings were held among the key stakeholders including the Minister for Planning, Development and Special Initiatives (PD&SI) Co-Chairman of JCC, Chinese Ambassador and SAPM on Coordination in January 2023, wherein it was decided that the project work must start immediately before Finance Closing to complete/energize the project by December 2025. Later, during caretaker PM’s visit to China to attend 3rd Belt and Road Forum (BRF), held on October 17-18, 2023, Federal Minister for Energy along with Minister for PD&SI had a separate meeting with representative of CPPCL (VP of CCCC International), who confirmed that Sinosure’s approval is in place and CCCC will start internal approval process and seek opinions from banks to maintain close communication for early start of construction. However, it was highlighted that the Nepra determined tariff needs to be increased to make the project viable.

The Nepra after first tariff determination in December 2018, re-determined tariff on May 31, 2019 and again on July 26, 2023, based on review petitions by the CPPCL, however, the CPPCL was still not satisfied by the tariff and filed a third review petition to the Nepra in December 2023 after a gap of around six months.

It is still not clear whether the CPPCL will accept the Nepra determined tariff and start construction at site after 3rd review of tariff determination. Additionally, during 3rd BRF, Chinese Premier, while highlighting Gwadar Port’s potential for becoming a hub for regional connectivity, sought clarity on going ahead with construction of 300 MW Gwadar coal-fired power plant; and in case this project is not feasible, an alternate may be devised.

The PPIB maintained that despite these extensions and facilitation by the PPIB/GOP, the CPPCL has not completed requirements and obtained formal extension in the FC date through LoS amendment.

Further, the CPPCL in its request in its latest letter asked for additional three-year extension in the already extended FC (i.e. from January 2024 to January 2027) with a COD of 33 months from the FC date, anticipated to be in 2030.

The PPIB further stated that the request is not aligned with the decisions, directives, and discussions held during high-level meetings involving senior officials and leadership of both countries. In addition to the efforts by the PPIB towards successful implementation of the project, the PPIB on December 19, 2023 had already approached minister for PD&SI to take up the matter with high ranked Chinese officials in NDRC for earlier start of construction acclivities at site as considerable time had already lapsed.

The sources said, keeping in view the strategic nature of the project, Government of Pakistan cannot withhold development activities in Gwadar and Makran region for a long time i.e. till 2030.

The matter was submitted for perusal of Projects’ Committee of PPIB Board in its 10th meeting whose recommendations are as follows: extension in Financial Closing date of 300 MW Gwadar Coal Power Project at its already earmarked land at Karwat based on imported coal, up to December 31 2024, in accordance with Section 8.4 ii (c) of Power Generation Policy 2015, subject to extension in Performance Guarantee for a period of at least three months beyond extended Financial closing Date (i.e. up to or beyond March 31, 2025) and submission of Financial Closing date extension fee under Private Power and Infrastructure Board (Fee and Charges) Rules 2022 .

Recently, the CPPCL in a letter to the PPIB said that it will not be able to submit the Performance Guarantee extension to the PPIB before March 31, 2024 owing to due process of PG extension if the PPIB cannot issue the LoS extension letter before March 25, 2024. The company also requested the PPIB to grant an extension of three years starting from January 1, 2027 for the LoS.

The company has also sought an amendment to the COD stipulated in clause 3 of the second amended LoS as per prudent commercial practices, adding that it should be aligned with the tariff provision, which is 33-36 months from the financial closing date. The amended RCoD shall be communicated to CPPA-G and other relevant platforms.

Copyright Business Recorder, 2024