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ISLAMABAD: The Private Power & Infrastructure Board (PPIB) has sought fixed interest/mark-up rate on Cash Development Loans (CDLs) for three solar panel PV projects to be established in South Punjab, official sources told Business Recorder.

The PPIB, in a letter to Power Division referred to the acquisition of land for the development of large utility-scale solar PV projects under the Framework Guidelines for fast track solar PV initiative 2022, particularly substitution of expensive imported fossil fuels with solar PV energy.

According to the PPIB, framework guidelines stipulate that the land for project development under the substation initiative is to be procured by NTDC and leased to the project sponsors on leased by the Government of Pakistan through the PPIB.

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Pursuant to the framework guidelines, NTDC is currently engaged in the procurement of land sites for three solar PV projects under the substitution initiative, namely: (i) 2,400 acres for the 600 MW Muzaffargarh solar PV project; (ii) 2,400 acres for the 600 MW Jhang solar PV project and; (iii) 4,800 acres for the 1,200 MW Layyah solar PV project. The approved PC-1 indicates land costs of Rs 1.2 billion, Rs 2.4 billion and Rs 2.4 billion for each respective project.

The cost for land acquisition has been approved under the CDL for the procurement of land for the three solar PV projects. The interest/mark-up rate for CDL is annually determined by the federal government and remains fixed for the particular year. The annual interest/mark-up rates provided by Finance Division for the last three fiscal years are as follows: (i) 10.30 percent in FY 2020-21; (ii) 11.20 percent in 2021-22 and 15.58 percent for 2022-23.

PPIB Managing Director Shah Jahan Mirza further apprised that land acquisition process and subsequent development of the large utility-scale solar PV project are anticipated to span a minimum of five years.

Further, the cost of the land, inclusive of interest/mark-up rates, is to be recovered from the project sponsors in accordance with their Security Package Documents (SPDs) including the land lease agreement, the project sponsors will be obligated to make annual lease payments from the Commercial Operations Date (COD). These payments will either be treated as pass-through or adjusted within the negotiated/awarded tariff.

The PPIB stated that to establish the annual land lease payments including interest/mark-up rates be incorporated in the land lease agreement and to finalize/determine the tariff for solar PV projects, it is prudent to set a fixed interest/mark-up rate for the CDLs.

Additionally, given the approximate project development timeline of five years for large utility-scale solar PV projects, a grace period of five years for the repayment of CDLs may also be considered.

The PPIB has requested Power Division to take up the matter with the Finance Division for approval at the earliest for furtherance in the matter.

Copyright Business Recorder, 2024

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