Kohala hydropower project: PPIB board approves extension of financial close date

ISLAMABAD: The Board of Private Power and Infrastructure Board (PPIB) has approved extension in financial closing date under the Letter of Support (LoS) of 1,124 MW Kohala Hydropower Project for a period of three years sans extension fee being a strategic hydropower project involving foreign direct investment, sources close to the PPIB managing director told Business Recorder.

The decision was taken by the board in its previous meeting, presided over by Secretary Power Division Dr Fakhar Alam Irfan.

The PPIB MD apprised the board that 1,124 MW Kohala Hydropower Project is a China-Pakistan Economic Corridor (CPEC) project, located on River Jhelum in AJ&K and is being developed by M/s Kohala Hydro Company Private Limited-KHCL.

Kohala HPP: FC date will be extended

The LoS was issued by PPIB on December 31, 2015. This extension in FC date necessitated due to the factors beyond reasonable control of KHCL like, (i) clearance from Sinosure for arrangement of debt from Chinese banks; (ii) refusal of the NEPRA to allow foreign exchange loss/gain above seven per cent as pass-through; (iii) non-approval of certain clauses of Tripartite Power Purchase Agreement (TPPA) i.e. ROE adjustment through tariff etc (iv) delay in land acquisition due to change in land acquisition law, ie, Land Acquisition Act 1894 versus newly-enacted Land Acquisition Act 2020.

He added that after commissioning of Neelum-Jhelum HPP (NJ-HPP), river flow was diverted and Muzaffarabad was bypassed, which increased concentration of untreated sewage wastes in the river bed, leading to protest by local community. To resolve this issue, it was decided that Sewage Treatment Plants (STP) and Water Bodies (WB) will be made part of project.

The ECC decided STP and WB as integral part of the project.

However, the Nepra did not consider STP and WB as integral part of the project for allocation of additional funds.

The board was apprised that on July 11, 2024, a meeting of stakeholders was convened, wherein, it was noted that reluctance of M/s 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. The matter was submitted for perusal of Projects’ Committee of PPIB Board in its 11th meeting which recommended extension of three years on single performance guarantee.

The MD PPIB also submitted the request of KHCL for waiver of 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 extension fee. Representative GoPunjab, Dr Naeem Rauf, Secretary Energy, opined that impact of extension on tariff should be prepared by the PPIB management and presented the same to the board.

After deliberations and considering recommendations of Projects’ Committee, the board took the following decisions; (i) approved extension in the Financial Closing date under the LoS of 1,124 MW Kohala Hydropower Project for a period of three years, ie, from October 1, 2024 to September 30, 2027 subject to the followings: (i) extension will be granted on the basis of Single Performance Guarantee, as the reasons for delay in the achievement of Financial Closing were beyond the reasonable control of the Project company; (ii) the Project Company shall extend the validity of the Bank Guarantee three months beyond the allowed period of extension; and (iii) the request of the Project Company for waiver to the LoS extension Fee is 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 on March 2023.

Copyright Business Recorder, 2024