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ISLAMABAD: The Board of Private Power and Infrastructure Board (PPIB) has granted extension of four months to Turkish firm M/s Zorlu Solar Pakistan Limited (ZSPL) in financial close without doubling the Performance Guarantee (PG), well-informed sources told Business Recorder.

ZSPL, in its letter of November 16, 2023 requested the PPIB for grant of four-month extension in the FC date under the Tripartite Letter of Support (TLoS) due to factors beyond the control of the ZSPL that have adversely affected its ability to achieve FC, and progress made by ZSPL to achieve the FC.

According to PPIB, ZSPL secured TLoS from AEDB (now PPIB) on June 26, 2023 for development of 100MW solar PV project in Quaid-e-Azam Solar Park, District Bahawalpur, Punjab. ZSPL received the project generation tariff of US cents 4.01/kWh from NEPRA on August 12, 2022.

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The Power Purchaser (CPPA-G) filed a review motion before NEPRA on September 20, 2022 against this tariff determination. NEPRA, in its decision of June9, 2023 revised the tariff from US cents 4.01/kWh to US cents 3.9017/kWh and allowed four-month extension in the FC date by acknowledging the delay in finalizing the decision on the ongoing petition.

ZSPL, in its letter of November 16, 2023, stated that NEPRA issued the revised tariff after a lapse of nine months from the date of filing of the Review Motion, however Authority granted a four-month extension in the FC but even with this extension the Company was given a challenging timeline of only five months to achieve FC as opposed to the initial intent of Authority to provide twelve months in accordance with the tariff determination.

ZSPL further noted that, after the issuance of TLoS, Project Company has made the following developments: (i) negotiated and finalized the Implementation Agreement (IA) with PPIB;(ii) finalized the draft land lease agreement with PPDB;(iii) EPC and O&M contractors have been finalized for supply, construction, erection, commissioning and operations of the project; (iv) successfully negotiated and agreed with a syndicate of local financiers (Local Lenders) to provide the local portion of the project finance facility and a term sheet has been finalized; (v) engaged with the Asian Development Bank (ADB) for foreign portion of project finance facility, ADB’s concept approval received and currently negotiating the financing structure for the foreign finance facility; and (vi) substantial progress is made on the EPA by finalizing the draft EPA except the operational implication of degradation.

ZSPL stated that despite its considerable efforts and progress, the Project Company is unable to achieve FC by the Financial Close Date due to (i) delay in MLFR decision by NEPRA, (ii) delay in finalizing the degradation mechanism in the EPA with the purchaser as per the NEPRA’s determination, and (iii) Pakistan’s macroeconomic situation.

ZSPL requested PPIB for a grant of a 4-month extension in the FC date without doubling the amount of the Performance Guarantee (PG), as the delays in FC are attributed to Public Sector Entities.

As per Para A (6) of the TLoS, an extension in the FC is subject to: (i) the Project Company obtaining written consent for the extension in the FC from NEPRA and the Power Purchaser, and delivering it to PPIB; (ii) the amount in the PG is to be doubled, and the expiry date of the PG is extended 3 months beyond the Extended Financial Closing Date.

However, PPIB, with the concurrence of GoPb, may waive the doubling of the PG if the delay in the achievement of FC is attributed to Public Sector Entities; (iii) the Project Company submits a report to PPIB detailing the proposed additional actions it will undertake to achieve the proposed extended financial closing date; and (iv) the GoPb gives its concurrence to the extended FC date.

ZSPL requested NEPRA, PPDB, and CPPA-G for consent to extend the FC date in letters of October 31, November 16 and November 20, 2023, respectively. PPDB, in its letter of December 4, 2023, addressed to NEPRA, supported four months’ extension in the FC date and NEPRA conducted a hearing on December5, 2023 regarding ZSPL’s application for tariff modification petition.

During the hearing, NEPRA discussed ZSPL’s claim to allow a four-month extension in FC without impacting on the existing Commercial Operation Date (COD) of October 11, 2024, revision of tariff owing to the revised cost of PV panels, and allowing a mix of local and foreign financing instead of 100% foreign financing, given the impact on tariff. Decision of NEPRA on the request of ZSPL is awaited.

The sources said, PPIB did receive the consents from NEPRA and CPPA-G, required under the TLoS for grant of extension in the FC date. Further, as per the PPIB FEE Rules, ZSPL was required to submit the fee together with the application for securing the extension in the FC date under the LoS. ZSPL did not submitted the fee required under the PPIB Fee Rules.

Foregoing in view, PPIB proposed that the Board may consider granting extension in the validity of TLoS in alignment with any extension granted by NEPRA with respect to the achievement of the FC date, in view of the review petition filed by ZSPL.

PPIB also proposed that the Board may consider granting this extension without doubling the Performance Guarantee (PG), subject to submission of: (a) written consent for the extension in the FC from NEPRA, CPPA-G and PPDB, (b) extended Performance Guarantee (PG), and (c) PPIB fee as per PPIB fee rules.

The Board also requested to allow PPIB to grant extension in the validity of TLoS in alignment with any extension granted by NEPRA with respect to the achievement of the FC date, pursuant to the review petition submitted by ZSPL, without doubling the PG, provided that the following conditions are met: (a) submission of written consent for the extension in the Financial Closing (FC) from NEPRA, CPPA-G, and PPDB; (b) submission of extended PG; and (c) payment of the PPIB fee in accordance with the PPIB fee rules.

PPIB Board, in its meeting held on January 18, 2024 accorded approval of extension in FC for four months’ subject to prescribed conditions.

Copyright Business Recorder, 2024

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