Riali-II project security package approval: PD all set to place summary before ECC

ISLAMABAD: Power Division is all set to place a summary before the Economic Coordination Committee (ECC) of the Cabinet for approval of security package documents of 7.08 MW Riali-II Hydropower project under Power Generation Policy, 2015, sources told Business Recorder.

However, Finance Division is of the view that Power Division may ensure that proposed documents are consistent with the Power Generation Policy 2015 in respect of contractual matters i.e. no further obligations and guarantees are created over and above what have been offered under the policy.

According to Finance Division, GoP will not be assumed any obligation for payment of Water Use Charges (WUC) to the AJ&K, with the stance that same to be paid by the IPPs from its tariff.

Hydropower project: Riali-II to be processed on ‘must run & take-and-pay’ basis

Recently, PPIB Board had accorded approval for extension in the Financial Closing Date under the Tripartite Letter of Support (TLOS) of 7.08 MW Riali Hydropower Project for a period 18 months i.e. from April 13, 2024 to October 12, 2025.

During the meeting MD PPIB apprised that 7.08 MW Riali-II Hydropower Project is run of river project located on Ghori Nullah, in AJK.

Due to the no availability of ECC approved Security Documents (Implementation Agreement GoPIA - AJ&K Implementation Agreement-AJ&KlA, Energy Purchase Agreement-EPA and Water Use Agreement - WUA) for small hydro power projects, three extensions of 12 months each on Sept 7,2021, December 29, 2022 and November 10, 2023, respectively, were granted in the Tripartite Letter of Support.

As per the Amendment#3 (3rd Extension) of TLOS, the Project Company was required to sign the Project Agreements before Financial Close of the project for which they approached SIFC for early processing of approval of Project Agreements from CCoE/ECC.

Accordingly, summary was considered by the CCOE on July5, 2024 and it concurred with the proposal. Now, the standard documents are under process for ECC approval through Ministry of Energy (Power Division).

As per the commitment of the Project Company and present progress status of project, the Project Company will require 14 to 18 months to achieve its Commercial Operation after being provided with drafts of approved Security Agreements.

The Project Company has already started civil construction work of the Project from its equity and 60-65% of overall work has been completed at the Project site.

The Board was apprised that the Project Company has requested exemption from the payment of TLoS extension fee stating the reason that the delays in the provision of project agreements were not in the Company’s purview. Although there is no such provision in PPIB Fee and Charges Amendment Rules 2022 which allow waiver of fee to this project.

MD PPIB further explained that the matter was submitted for perusal of Projects’ Committee of PPIB Board in its ’11ih meeting, which recommended an extension of 18 months on single performance guarantee.

The Board approved extension in the Financial Closing date under the Tripartite Letter of Support of 7.08 MW Riali Hydropower Project for a period of 18 months, ie, from April 13, 2024 to October 12, 2025 subject to the followings:

(i) extension will be granted on the basis of a Single Performance Guarantee, in line with Clause 8.4

(ii) (c) of the Power Policy 2015, as the reasons for delay in the achievement of Financial Closing were beyond the reasonable control of the Project Company; and

(iii) the Project Company shall extend the validity of the Bank Guarantee three months beyond the allowed period of extension, and applicable extension fee shall be paid in accordance with PPIB Fee and Charges Amendment Rules 2022.

Copyright Business Recorder, 2024