Coal-fired power plant: ADB sets August 15 deadline for KE, JCPL and GHCL to ink PPA

ISLAMABAD: The Asian Development Bank (ADB) has given the deadline of August 15, 2024 for signing of Power Purchase Agreement (PPA) among K-Electric (KE), Jamshoro Coal Power Limited (JCPL) and GENCO Holding Company Ltd (GHCL) on 600 MW coal-fired power plant, well-informed sources told Business Recorder.

The Bank has set the deadline of August 15, 2024, in a aide memoir sent to the government after a visit to its Review Mission.

The sources said the bank has also set the following deadlines; (i) submission of cancellation 3090 loan proceeds and category reallocation loan 3092 - July 31, 2024; (ii) submission of variations related to EPC contract( soil, burial, ask, pond, operational spares) and PIC contract for ADB approval - July 31, 2024; (iii) submission of the EIA addendum for ash ponds - July 15, 2024; (iv) submission of the addendum of EIA for ash and gypsum transportation - July 30, 2024; and (v) propose options ( dates and locations) for ISO 14001 and ISO 45001 trainings.

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

According to the details, ADB fielded a loan review mission on 1-3 July 2024 for the Loans 3090/3092. The Mission was fielded considering the latest request by the borrower for extension of the loans by six months till December 31, 2024. The mission objectives were to: (i) review the overall implementation progress of the Project, (ii) examine in detail the major activities/challenges and agree on an action plan leading to the operationalisation of the power plant within the requested loan extension period (iii) assess the EA’s compliance with loan covenants and safeguards monitoring requirements.

The Mission held meetings with the top management and Project Implementation Unit (PIU) of the Implementing Agency (IA) Jamshoro Power Company Limited (JPCL), the executing agency GENCO Holding Company Ltd (GHCL), Power Division and a wrap up with the Ministry of Economic Affairs (EAD).

The Mission requested the EAD to confirm the Mission findings and agreed actions provided in the Aide Memoir of 12 July 2024.

Sharing the background, the bank says that on December 1, 2013, ADB approved financing of $900 million for the Jamshoro Power Generation Project. The total ADB financing included two OCR loans i.e., L3090 and L309l for $840 million and $30 million, respectively; and an ADF loan (L3092) for $30 million. The loan agreements were signed on February 12, 2014 and the loans became effective on November 20, 2014. The original loan closing date was on March 31, 2019.

On October 29, 2018, $150 million from L3090 was cancelled as cost savings were achieved through the rigorous international competitive bidding process and a further cancellation of $32 million on May 11, 2020 reduced the total loan amount to $658 million. On March 24, 2020, $26.7 million from L3091 was also cancelled and subsequently reallocated to the Emergency Assistance Loan of $300 million to combat the COVID-19 pandemic in Pakistan. The current loan amount of L3090-PAK is $658 million, and Loan 3092 is SDR’9.38 million. Loan 3091 was closed on September 21, 2023.

The project impact is enhanced energy supply in Pakistan. The outcome is a more efficient energy mix promoted through diversification from expensive heavy fuel oil to less expensive coal. The Project will: (i)increase capacity of the Jamshoro thermal power station (TPS) by installing a 600-MW (net) super critical coal-fired unit using an 80/20 blend of imported sub-bituminous coal and domestic lignite when available (ii) ensure compliance with the national environmental standards by installing emission control devices for the existing units and remediating the site (lane); (iii) enhance capacity of GHCL and JPCL by providing financial, technical and operational training; and (iv) introduce education on coal-fired plant operation.

The Mission was apprised of the progress of construction works of the main EPC contract ($527 m) for the 600 MW super critical coal power plant against Loan 3090. The physical progress achieved is around 95% , major activities like boiler acid cleaning, refractory installation works, turbine lube oil system commissioning, steam blowout and grid connectivity have been completed. At present, FGD glass flake painting is in progress. Testing activities that are to be witnessed by the power purchaser and the transmission utility are scheduled within Q3. Subsequently unit startup and turbine generator testing will be conducted spanning over 5 days and finally the unit will have a “Reliability Run Test” for 7 days as required by the Grid System Operator under Pakistan Grid Code. The commercial operations date (COD) as provided by JPCL is July 20, 2024 however the remaining activities leading to energisation of the plant are inter-dependent and any slippages in one activity can delay the final commissioning and operational acceptance.

The Mission made it clear to JPCL management and the project team that the latest loan extension till December 31, 2024 is the final extension, therefore it is imperative that the plant is commissioned within the loan period enabling ADB to disburse the 20% payments ($ 110 million) due against the contractual milestones- JPCL was further informed that the winding up period for the loan from January 2025 till April 2025 will be available to process disbursements against the progress achieved till December 31, 2024.

In Loan 3090, apart from the main EPC contract, five other contracts were awarded totaling around $6.8 million related to remediation works for the site of existing RFO/gas-based units at JPCL. These remediation works are not required for the site of the ADB financed coal power plant as it is being constructed at a different location near to the existing units. The contracts covered construction of effluent evaporation ponds, municipal solid waste disposal facility, hazardous solid waste disposal facility and sewerage treatment plant. The work for all the contracts is completed, however subject to finalization of punch list items, the contracts need to be formally closed and outstanding amounts, if any, need to be disbursed. Works related to soil remediation of the RFO unloading area will be done under the main EPC contract within the extended loan period.

The loan 3090 proceeds may not be fully utilized considering the remaining works. The Mission asked JPCL to consider cancellation of the unutilized amount including the contingency amounting to $ 52.5 million. Initial estimates for cancellation as calculated by JPCL were about $ 57 million. However, a formal request for cancellation will be forwarded by JPCL/GHCL once deliberations are held internally related to the remaining works in the EPC contract.

Copyright Business Recorder, 2024