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ISLAMABAD: Private Power & Infrastructure Board (PPIB) has extended Letter of Interest (LoI) of 640-MW Mahl Hydropower Project till December 31, 2024 subject to the condition that the Company shall keep the Bank Guarantee valid for three months beyond the allowed period of extension of the LoI, official sources told Business Recorder.

During a recent meeting of PPIB Board, MD PPIB, Shah Jahan Mirza apprised that 640-MW Mahl Hydropower Project is located on River Jhelum at boundary between AJ&K, Punjab and Khyber Pakhtunkhwa and is being developed by Mahl Power Company (Pvt.) limited under 2002 Policy.

China Three Gorges South Asia Investment Ltd (CSAIL) is the main sponsor. The LoI was issued in 2014 and feasibility study was completed in 2017 and tariff was determined by Nepra. The project was not part of IGCEP 2021-30; however, it was included in IGCEP 2022-31.

Mahl hydropower project: PPIB agrees to grant extension in LoI milestones

Board was further informed that PPIB issued Letter of Interest (LoI) to the Project Company on October 21, 2014 where under the Company was required to: (i) complete bankable feasibility study within stipulated time; (ii) submit the feasibility stage tariff proposal to Nepra through Power Purchaser within sixty days after approval of the feasibility study by Panel of Experts (PoE); and (iii) obtain the Letter of Support ( LoS) from PPIB within sixty days after determination of feasibility stage tariff by Nepra.

The Project Company completed the feasibility study of the Project which was approved by the PoE on January 2, 2017. Subsequently, feasibility stage tariff was finally decided by Nepra on October 31, 2019. And LoS issuance to this project was paused in light of CPPA-G’s letter of October 5, 2019, till its inclusion in the IGCEP. The Project has now been included in IGCEP with its Commercial Operation Date (COD) as July 2030.

The company has requested to shift the COD ahead for two years on account of prevailing circular debt situation, depleting foreign exchange reserves, delayed payments to the existing IPPs and the recent economic conditions that are not suitable for pursuing financing for large scale hydropower projects.

Representative of Punjab government queried that if project was halted on instruction of the GoP then why the extension fee is being charged. MD PPIB explained that extension fee is charged in compliance with rules and it falls under category of processing fee. There is no exemption available on basis of reason of delay.

The Chair expressed the view that PPIB’s fee structure needs to be rationalised to account for situations where delay is on the part of the GoP entities. The Board desired representative of Punjab government and senior official(s) from PPIB nominated by MD PPIB to come up with recommendations in this regard, in the next meeting of Board.

After detailed deliberations, the Board approved extension in the milestones of the Letter of Interest of 640 MW-Mahl Hydropower project from April 2 2023 to December 31, 2024 on the basis of Single performance Guarantee subject to the followings: (i) Project Company shall keep the Bank Guarantee valid for three months beyond the allowed period of extension of the LoI; (ii) timeline for the Project Company to get LoS from PPIB will stand extended till the extended timeline of the LoI; (iii) the COD of the project in the next iteration of the IGCEP will be adjusted according to the extended LoI period; and (iv) payment of LoI extension fee by the company will be applicable under PPIB (Fee and Charges) Rules.

The Board formulated a committee under representative of government of Punjab with relevant senior level member(s) from PPIB to be nominated by MD PPIB to review and, if required, rationalize the extension of LoI/LoS fees under (Fee and Charges) Rules of PPIB. The Committee is to submit its recommendations to the Board in its next meeting.

Copyright Business Recorder, 2023

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