Gwadar: imported coal-fired project faces axe

ISLAMABAD: The government is likely to scrap 300 MW imported coal power project at Gwadar and the Chinese company, M/s CIHC Pak Power Company (Pvt) Ltd (CPPCL) is unwilling to move ahead until further upward revision in tariff, well-informed sources in PPIB told Business Recorder.

Managing Director Shah Jahan Mirza in a letter to CEO of the company gave a deadline of September 18, 2024 for final reply otherwise GoP will adopt its course.

Mirza in his letter in continuation to PPIB’s three earlier letters on this matter, stated that CPPCL was advised to consult Chinese authorities and project sponsors and provide updated status on further development of the project.

Early completion of Gwadar Power Plant ordered

CPPCL, he wrote, was issued Letter of Support (LoS) on August 23, 2019, with Financial Closing (FC) date of April 23, 2020.

However, to accommodate various issues including notable delays in obtaining acceptable tariff from Nepra, lenders’ reluctance, issuance of Sinosure policy, execution of Land Lease Agreement with Government of Balochistan and No-Objection Certificate from Balochistan EPA PPIB facilitated CPPCL and approved six extensions in FC thereby extending the FC date till December 31, 2024.

However, despite repeated reminders CPPCL has not obtained extension in FC through amendment to its LoS, due to non-submission of FC date extension fee.

The CPPCL signed Security Package Agreements (IA, SIA and Quadripartite PPA) with the assistance of PPIB on April 8, 2021, with Required Commercial Operations Date (RCOD) of June30, 2023.

After the ground breaking ceremony in November 2019, it was believed that CPPCL would immediately start construction activities, in order to achieve COD by June 30, 2023; but construction of the project did not start.

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

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

Regarding, assistance in obtaining a favourable tariff, Government of Pakistan also extended its maximum support in tariff determination process. The Nepra initially determined the tariff of 6.6337 Cents/kWh for the project in 2018, which was revised thrice in response to review petitions filed by CPPCL.

The latest tariff announced by Nepra 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; however, CPPCL neither approached Nepra’s Appellate Tribunal for tariff revision, even after a lapse of four months, nor started construction at site.

In view of GOP’s efforts to implement the project, Minister for PD&SI during his visit to China in July 2024 discussed delays in construction of 300 MW Gwadar coal power project with officials of NDRC and representatives of CCCG and clarified that NEPRA has already reviewed tariff for the project thrice, hence tariff may not be reviewed any further.

Accordingly, Chinese side and project sponsors were urged to make decision on Gwadar Coal Power Project or any other alternate project within 15 days.

The same was communicated to CPPCL on July 26 and August 5, 2024, to consult with Chinese Authorities, regarding further course of action and provide its response, however, the response of CPPCL is not satisfactory, and did not address further course of action for development of the project.

In view of the importance of project for development of Gwadar area, Minister for PD&SI, in a CPEC progress review meeting, again desired to seek CPPCL’s official position on implementation of the project.

Therefore, CPPCL is once again advised to convey its firm position regarding implementation of the project, at the earliest, but not later than September 18, 2024.

Copyright Business Recorder, 2024