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ISLAMABAD: Power Division has sought approval of the Economic Coordination Committee (ECC) of the Cabinet of an arguably a "unique" Quadripartite Power Purchase Agreement (QPPA) for establishment of 300MW coal-fired power plant at Gwadar, well-informed sources in PPIB told Business Recorder.

The Implementation Agreement (IA) and Supplemental Agreement (SA) of the project have yet not been cleared by the PPIB's Board of Directors (BoD).

Sharing details, sources said the government of Pakistan (GoP) and Government of China entered into a China-Pakistan Economic Corridor Energy Project Cooperation Agreement on November 8, 2014 (CPEC Agreement) pursuant to which 300 (150 x 2) MW coal-fired power generation complex, to be located at Gwadar, Balochistan, was conceived and approved. Accordingly, the Economic Coordination Committee (ECC) of the Cabinet on March 30, 2017 in terms of Rule 5 of PPRA Rules 2004 authorized PP1B to proceed for award of the project to M/s CIHC Pak Power Company Limited as a designated project under Power Generation Policy 2015.

Accordingly, PPIB issued a Letter of Intent (loI) and later after its tariff determination by National Electric Power Regulatory Authority (NEPRA) issued a Letter of Support (LoS) to the Company. As per the terms of the Policy and the LoS, the Company is required to execute Implementation Agreement (IA) and Power Purchase Agreement (PPA) substantially as per standard drafts approved by ECC in 2015 and 2017. The standard IA provides protection against expropriation, political force majeure risks, change in law etc., and also lays down provisions of compensation amounts in case of termination of the IA due to events of default and issuance of GoP guarantee to cover payment obligations of the power purchaser under the PPA. The ECC in its decision of March 19, 2015 also authorized the Board of PPIB to negotiate and approve project specific changes in the standard draft of IA provided GoP obligations are not adversely affected.

Accordingly, the Company and PPIB after various rounds of negotiations finalized project specific IA wherein the effect of the new quadripartite regime of PPA has been introduced for the project. Furthermore, a Supplemental Agreement has also been finalized with the company that mirrors the provisions of the CPEC Agreement.

Earlier, ECC approved standard PPA for coal power projects which was meant to be executed between the IPP and the National Transmission and Despatch Company (NTDC) being power purchaser on behalf of Ex-Wapda Distribution Companies (Discos).

However, after Central Power Purchasing Agency Guarantee Limited (CPPAG) became a separate corporate entity from the NTDC, various PPAs were executed with CPPA-G with back to back arrangement with NTDC in relation to interconnection, despatch and other matters falling in latter's mandate. On the other hand, the Gwadar project for some initial years was to remain operative on local/ isolated grid of 132 KV to be constructed, owned and operated by Quetta Electric Supply Company Limited (QESCO) and thereafter when a new transmission line would have been constructed, it was to be connected with the National Grid owned and operated by NTDC. Furthermore, the project was to be issued dispatch instruction by the system operator commonly known as National Power Control Centre (NPCC) currently operating under the NTDC. Due to this “unique” nature of responsibilities divided amongst three public sector entities, now the project specific PPA was required to be executed amongst CPPA-G, NTDC, QESCO and the Company. Accordingly, the Company has negotiated and finalized project specific Quadripartite Power Purchase Agreement (QPPA) with the CPPA-G, the NTDC and the QESCO and their respective boards have accorded their approvals thereto.

The agreement, sources said, has not been approved by the Board of PPIB due to the resignation of the ex officio Chairman of PPIB Board, i.e. the Federal Minister for Energy. The Board of PPIB has been rendered non-functional therefore Board approval for project-specific IA and Supplemental Agreement has not been procured.

Copyright Business Recorder, 2021

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