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ISLAMABAD: The China Export Credit Insurance Corporation (Sinosure), a state-funded insurance company, is reportedly reluctant to issue Letter of Support (LoS) to 700.7MW Azad Pattan Hydropower Project due to rising circular debt and negative outlook of Pakistan’s power sector, well informed sources in PPIB told Business Recorder.

This was revealed by M/s Azad Pattan Power, Pvt. Ltd (APPL) at a recent meeting held in the Private Power and Infrastructure Board (PPIB), convened to discuss the extension in validity date of LoS/ financial closing for the project.

The 700.7MW Azad Pattan Hydropower Project, located on River Jhelum at dual boundary between AJ&K and Punjab is being developed under provisions of Government of Pakistan (GoP) Policy for Power Generation Projects 2002 by APPL comprising of China Gezhouba Group as the sponsors. The project is included in the NEPRA-approved Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30 and is part of the China Pakistan Economic Corridor (CPEC) program. The project is at advanced stage of development with only few milestones pending including IRSA’s NOC which are causing delay in Financial Closing of the project.

Agreement inked for construction of 700MW Azad Pattan Hydropower Project

During the meeting, the project company submitted that LoS of Sinosure is a pre-requisite to confirm financing arrangement from Chinese banks; however, due to rising circular debt and negative outlook of Pakistan power sector, Sinosure is reluctant to issue Letter of Support (LoS) for the project thus delaying the conclusion of financing arrangement for the project.

PPIB highlighted that primarily arrangement of financing is responsibility of sponsors; therefore, they should follow up the matter with Sinosure. The representative of Project Company apprised that they have used their good offices in China; therefore, due diligence of the Project Agreements have been completed. Feasibility agreements negotiated awaiting execution subject to Sinosure clearance and other financing documents including security are under negotiation and finalization.

Copyright Business Recorder, 2021

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