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ISLAMABAD: M/s Shanghai Electric has sought extension in financial closing date and required commercial operation (RCO) date sans conditions for its 1,320 MW Thar coal project till December 31, 2022 and July 22, 2023 respectively, saying that circumstances are not in the company’s control.

In a letter to the Managing Director PPIB, the power company’s Chief Executive Officer (CEO) Meng Donghai has explained reasons for seeking extensions.

On July 15, 2022, PPIB Board had approved extension in financial closing date till December 31, 2022 subject to following conditions: (i) the project will not claim or request for any extension in RCOD in future on basis of extension in Financial Closing Date;(ii) Thar Coal Block -1 (TCB-1) shall to CPPA-G by way of Liquidated Damages (LDs) a pro-rata amounts equivalent to the Transmission Service Charge (TSC) payable by NTDC to Pak Matiari-Lahore Transmission Company Limited (PMLTC) as agreed in Power Purchase Agreement; and (iii) submission of prescribed FC date extension fee to PPIB.

According to the CEO, the company had clearly mentioned the reasons that necessitated delays which are beyond reasonable control of the sponsors and hence such request falls within the purview of clause 8.4 (ii) (c) of the Policy 2015. Further, the PPIB had earlier allowed all the extensions pursuant to the terms of Letter of Support (LoS) whereas presently PPIB has referred to the Policy 2015 provisions, which is deviation from past practice in the field. Even otherwise pursuant to clause 5 of the LoS extension in the Financial Closing Date is permissible on account of events beyond the reasonable control of the Company.

The company had submitted a request on April 29, 2022 to the CPPA-G, along with complete justification, reasons and grounds including but not limited to global Covid-19 Pandemic, sovereign default risk, delay in acquisition of land, security situation, for extension of RCOD. Due to onset of global Covid pandemic, the CPPA-G had allowed extensions up-to six months or more to the power companies and transmission companies during year 2021. Notwithstanding, the CPPA-G approached the PPIB, being the one window facilitator and sole initiator of the projects, to provide its opinion on the request of the company.

Thar power plant to start operations soon: Dastgir

The LoS pursuant to clause B acknowledges that the project is one of the priority projects included in the China - Pakistan Economic Corridor (CPEC) agreement between the Government of Pakistan and Government of People’s Republic of China. Hence, the company in the best interest of Pakistan and CPEC at the behest and request of Government of Pakistan agreed for expeditious achievement of Commercial Operations Date (COD) despite numerous challenges. The company has completed 85% of works through its equity and sponsors support in order to avoid any significant and material delays in completion of the project.

Current overall situation of Pakistan(including potential risk of sovereign default which with manifestation in terms of insufficient payment for power is affecting the evaluation of the Sinosure on the Project’s policy) is further affecting the Financial Closing of the Project; and in turn led to the unavailability of the loan, further resulting in shortage of funds for the project, despite the fact that the capital fund is already in place fully, which was contributed by the company, he added.

In so far as the conditionality pertaining to payment of LDs in a pro-rata amounts equivalent to the Transmission Service Charge (TSC) payable by NTDC to PMLTC is concerned, Shanghai Electric is already incorporated in Section 9.4 (d) of the PPA which shall take effect therein in accordance with the mechanism as agreed between CPPA-G and the Company depending on the assessed period of the liability including excusatory, mitigating and or aggravating factors, demonstrated capacity of the transmission line, unutilized capacity of the transmission line and allocation of unutilized capacity to the project.

Copyright Business Recorder, 2022

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Yousuf Sep 13, 2022 02:01pm
I wash come power plant
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