ISLAMABAD: The government is all set to extend Financial Close (FC) date of 1124-MW Kohala Hydropower Project under Letter of Support (LoS) for three years starting from October 1, 2024 and waive extension fee subject to certain conditions, sources close to Managing Director PPIB told Business Recorder.
The decision was taken at a meeting of PPIB’s Projects Committee held under the chairmanship of Additional Secretary (Planning), (nominee of Secretary, Planning Commission).
Managing Director, PPIB Shah Jahan informed the meeting that 1124-MW Kohala Hydropower Project is a CPEC project, located on river Jhelum in AJ&K and is being developed by M/s Kohala Hydro Company Private Limited-KHCL -a subsidiary of China Three Gorges Corporation of China.
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LoS was issued by PPIB on December 31, 2015. This extension in Financial Close (FC) date was necessitated due to the factors beyond reasonable control of KHCL like; (i) delay in land acquisition due to change in land acquisition law, (ii) refusal of NEPRA to allow foreign exchange loss/ gain above 7% as pass through, (iii) reluctance by Sinosure to approve the Project, and (iv) structural change in PPA regime from bipartite to tripartite PPA; however, a Tripartite Agreement (TPA) was executed among GoAJ&K, Federal Ministry of Energy (Power Division) and the Project Company on June 25 2020.
He added that after commissioning of Neelum Jhelum HPP (NJ-HPP), Neelum River flow was diverted bypassing Muzaffarabad, which increased concentration of untreated sewage wastes in the river bed, leading to protest by local community.
According to him, though Kohala HPP was located on Jhelum River and already adequate environmental flow was envisaged in the design yet the local community continued protests against this project, as well.
To resolve this issue, it was decided that Sewage Treatment Plants (STP) and Water Bodies (WB) will be made part of Kohala Project. ECC decided STP and WB as integral parts of the project. However, NEPRA did not consider STP and WB as integral parts of the project for allocation of additional funds.
The Committee was apprised that on July 11, 2024 a meeting of stakeholders was convened wherein it was noted that reluctance of Sinosure is long outstanding major hurdle. Non-existence of the project in committed category under base case scenario in draft IGCEP 2024-34 was also discussed.
During deliberations, there were divergent views regarding extension in FC date whereby, GoAJ&K and CPPA-G suggested two months extension whereas NTDC and PPIB supported three years extension.
MD PPIB also submitted the request of KHCL for waiver of the LoS extension fee and explained that the project qualifies for the criteria set-forth in the “Private Power and Infrastructure Board (Fee and Charges) Amendment Rules, 2022” for waiver of LoS extension fee.
On the matter of applicability of newly enacted Land Acquisition Act 2020 in AJ&K vs Land Acquisition Act 1894, the Chair opined that change in land acquisition law provides savings to previously completed transactions and where any acquisition is in process, the new law will become applicable. Representative GOAJ&K also confirmed this view.
On a question from representative GoPunjab regarding impact of extension of Financial Closing under the LOS on tariff of the Project, the Committee directed PPIB management to prepare and present impact of extension of Financial Closing under the LoS on project tariff at the time of presenting agenda to the Board in its upcoming meeting. The Committee also emphasised need for close monitoring of the project, so as to avoid delays in future.
After detailed deliberations, the Project Committee took the following decisions: (i) PPIB Management will prepare and present impact of extension of Financial Closing under the LoS on project tariff for consideration of PPIB Board; and (ii) PPIB Board may consider the request of the Project Company for approval of extension in the Financial Closing date under the LoS of 1124-MW Kohala Hydropower Project for a period of 3 years; i.e., from Oct 1, 2024 to September 30, 2027 subject to the following (a) the Project Company shall extend the validity of the Bank Guarantee three months beyond the allowed period of extension and (b) the request of the Project Company for waiver to the LoS extension fee may be approved being a strategic hydropower project involving foreign direct investment, under clause 3A of the “Private Power & Infrastructure Board (fee & charges) Amendment Rules, 2022” notified in March 2023.
PPIB is to seek approval of PPIB Board of decisions taken by the Project Committee headed under the chairmanship of Additional Secretary Planning Division.
Copyright Business Recorder, 2024
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