The Cabinet Committee on Energy (CCoE) headed by Prime Minister Nawaz Sharif has rejected a proposal of Chairman Wapda, Lieutenant General Muzammal Hussain (retired), to award contract of 800MW Mohmand hydropower project to FWO-JV on a negotiation basis instead of international competitive bidding, official sources told Business Recorder.
Chairman WAPDA briefed the meeting about Mohmand Dam project. He stated that proposed dam would have 1.2 MAF storage capacity and generate 800 MW electricity after completion. The PC-I for project had been submitted to Ministry of Water and Power on April 12, 2017.
He presented three options for award of contract for the project: (i) pre-qualification (standard tendering process); (ii) post qualification (no prior short listing involved); and (iii) negotiated tendering.
He stated that if the project is implemented through prequalification tendering then the work on the project would start on February 1, 2019 and completed by September 30, 2024 whereas, if negotiation tendering is adopted then the work on the project can start on November 1, 2017 and be completed by October 31, 2022. Prime Minister directed Ministry of Water and Power to adopt standard tendering process in light of PPRA Rules. The security audit of all power generation plants should be carried out by NESCOM.
Chairman WAPDA further suggested that due to security issues and experience gained from Kurram Tangi and Gomal dam projects, the government should go for negotiated tendering in light of rule 43(d) (iii) of PPRA Rules, 2004. FWO, in Joint Venture with well reputed firms having Technical and Financial capability to construct large dams, was recommended for an early initiation and timely completion of the project.
Secretary to the Prime Minister maintained that Wapda should not go for negotiated tendering for the project as it will be against the spirit of transparent procurement. He proposed that contract of the project should be awarded through tendering process, and FWO-JV should participate in the process.
Chairman Wapda also briefed the meeting about Dasu Dam. He stated that the dam was being constructed on the Indus River upstream of Dasu in KPK and it would be completed in two phases. The first phase would be completed by 2021 and would generate 2,160 MW of electricity. The total cost of the project would be $4.300 billion which would be met through foreign as well as local funding.
The World Bank would provide IDA credit loan for the project. Civil works contract had been awarded, while the E&M contract for the project was under process with the World Bank. The ground breaking ceremony would be held in June, 2017. Chairman WAPDA gave progress review on Diamer Bhasha Dam time line. He stated that cost of Land Acquisition & Resettlement (LA&R) was Rs 1 16 billion. Government of Pakistan had approved funding for LA&R through PSDP, while the power generation facilities would be built on commercial basis. PC-I for both dam part and power generation had been submitted to Ministry of Water and Power. He further stated that Wapda would arrange finances for construction of power plants through own resources/foreign loans. 85% land had been acquired for the project. He apprised the meeting that a Chinese team was currently preparing a detailed assessment report on the feasibility of executing of the project under CPEC programme. The report would be placed before Joint Energy Working Group of China and Pakistan on the basis of which formal decision would be taken. He further apprised that there was boundary dispute between Gilgit-Baltistan and KPK, which was affecting the work on KKH Bypass 34.83 Km (Shatial-Thar Nullah). He proposed that the implementation of CPEC route from Thakot to Raikoty be expedited. He also suggested that an alternate route involving 9 Km tunnel across Babussar Pass may be studied by NHA on priority basis.
At a recent meeting of ECC, Ministry of Water & Power revealed that Dasu Hydropower Project was one of the major projects currently being implemented by WAPDA. PC-I of the project was approved by ECNEC at a cost of Rs 486 billion ($4.38 billion). With an installed capacity of 2160 MW (6x360 MW) for stage-1, the project would provide for 12,225 GWh of clean electricity to the national grid annually and will help in addressing Pakistan's existing energy challenge.
The overall implementation schedule for construction of stage-1 from start of mobilization to commissioning of the final 6th generating unit is five years. The project was being partly funded by the World Bank through IDA credit-I of $588 million along with Partial Credit Guarantee (PCG) of $460 million (four times leveraged against IDA credit of $115 million). The additional IDA/IBRD credit of $533 million was expected in 2017 with additional PCG of $460 million. At present PCG of $460 million was available for commercial financing.
Ministry of Water & Power further stated that in the Project Appraisal Document (PAD) prepared by the World Bank, it was envisioned that commercial loans of $2,446 million for main works would be arranged on the strength of $460 million PCG. In addition, the tenure of the loan may also be extended to 15-20 years at competitive pricing in the international capital market. For meeting local currency component of the project cost, out of intended $2.446 billion, commercial loan of Rs 144 billion (equal to $1.44 billion) had already been arranged from local banks without using PCG. In order to arrange commercial credit of $800 million ($300 million loan + $500 million bond) under PCG for foreign currency cost component of the project, four commercial banks were engaged.
In the process of structuring of said credit, World Bank however, restricted the use of PCG of $180 million (60%) for $300 million loan and $200 million (40%) for $500 million bond, leaving $80 million spare for further commercial borrowing. After lengthy deliberations with international banks, along with the World Bank, it was agreed that Wapda would raise $350 million upfront through international capital market for a tenure of 10 years by using PCG of up to 60% ie $210 million which was equivalent to four times surrendered IDA credit of $52.5 million and the remaining amount (both principal and interest) would be guaranteed by GoP. However, to provide standalone exposure to Wapda in the international capital market, the Interest During Construction (IDC) of one year (3rd year) would be exclusively on Wapda's balance sheet with no GoP/World Bank guarantee. The remaining Foreign Commercial Component of approx $500 million would be raised either through loan/bond in early 2018 by using remaining PCG of $250 million ($460 million minus $210 million), which was equivalent to four times the surrendered IDA credit of $62.5 million. The foreign currency commercial borrowing in this phased manner would mitigate the negative impact of IDC on the project unnecessarily. The Credit Suisse bank through competitive bidding has quoted lowest all-in cost at IRR of 5.736% for $350 million loan of 10 years tenure with interest rate of Libor + 3%, $ swap rate of 2.40%, arrangement fee of 1.5% of the loan amount, commitment fee of 40% of the spread and capped transaction cost of $250,000/-.
Additionally Wapda would also be required to pay guarantee fee @ 0.75% p.a. on the IDA PCG of $210 million provided for $350 million loan amount. Wapda as borrower of $350 million would be responsible to repay this loan amount from hydel power sale income.
The ECC approved repayment of loan amount of $140 million ie 40% of loan amount of $350 million, whereas World Bank will provide guarantee for remaining $210 million ie 60% of $350 million loan amount whereas mark-up payments for entire loan amount of $350 million except for 3rd year of loan, on which no guarantee from any agency is required. Ministry of Finance informed the Ministry of Water and Power on April 28, 2017 that according to their letter they had cleared the facility with the interest rate of "$ LIBOR Swap Rate + 3%".
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