ISLAMABAD: Chinese company China Three Gorges South Asia Investment (SCAIL), has reportedly agreed to delay its 1,124 MW Kohala Hydropower Project because Letter of Support (LoS) extension remains pending due to concerns raised by the Power Division regarding electricity costs and the review of IGCEP framework, well-informed sources told Business Recorder.
The Power Division maintains that it will not accept new project in the IGCEP, even if it is a strategic project, whose cost is to be passed on to consumers.
The project had achieved the Commercial Operation Date (COD) of Pakistan’s first 720 MW Karot Hydropower Project on June 29, 2022.
Kohala hydropower project: PPIB board approves extension of financial close date
In a letter to Prime Minister Shehbaz Sharif, Chief Executive Officer (CEO) of SCIAL, Zhou Qiang stated that as a pioneer investor in Pakistan’s renewable energy landscape, China Three Gorges began its journey with establishment of a 50 MW wind farm in 2014.
Through its subsidiary, SCAIL, the company is committed to developing sustainable energy solutions, including the advancement of the 1,124 MW Kohala and 640 MW Mahl Hydropower projects in Azad Jammu and Kashmir (AJK). These initiatives align with both countries shared vision of providing clean and affordable electricity to the nation.
According to the Chinese firm, the 1,124 MW Kohala hydropower project, a strategic initiative, has achieved significant milestones, including signing of the Implementation Agreement (IA), Power Purchase Agreement (PPA) and Water Use Agreement (WUA). Both the EPC contractor and owner’s engineer have also been appointed. However, financial closure has been delayed due to issues related to Sinosure insurance.
The Letter of Support (LoS) issued by PPIB was initially valid until September 30, 2024. Following the request on May 31, 2024, the PPIB Board approved an extension of the financial closing date to September 2027 during its 144th meeting.
While the performance guarantee, of $ 5.62 million has been extended to December 2027, the LoS extension remains pending due to concerns raised by the Ministry of Energy (Power Division) regarding electricity costs and the IGCEP framework under NEPRA’s review. “We fully understand challenges confronting Pakistan’s power sector, including surplus capacity, high tariffs, and significant capacity payments to IPPs.
However, hydropower projects like the Kohala HPP, with a useful life exceeding 100 years, offer unmatched long-term benefits compared to other renewable energy technologies. Their development is critical for Pakistan’s sustainable energy future,“ said CEO SCAIL.
The Chinese Company argued that in the light of challenges and opportunities, it suggests measured adjustment to the Kohala Hydropower project’s development timeline, aligning its commissioning with future demand growth. During this period, the company will also reassess the project’s design, cost and financing structure to ensure a competitive and affordable tariff.
Copyright Business Recorder, 2025