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ISLAMABAD: Saudi company ACWA Power is reportedly ready to offer low tariff for solar project of 600 MWp subject to minimum project risk in Pakistan as it has installed solar projects at Cents 2 per unit in UAE and Oman, well informed sources told Business Recorder.

The ACWA Power has been interested to invest in the renewable energy sector in Pakistan for the past several years. The company has also been given directions in this regard by the Kingdom’s leadership. However, the investment has not materialised due to several reasons on Pakistan side, notably the absence of a G2G framework law and tariff discovery for such a project. The lack of progress has caused a lot of frustration on the Saudi side and has also led to the oft repeated complaints from the Saudi leadership that bureaucratic obstacles are preventing Saudi investment in Pakistan.

On October 23, 2023, Pakistan’s ambassador along with the Saudi Ambassador to Pakistan Nawaf Al Malki held a meeting with Mohammad Abunayyan, Chairman ACWA Power, to revive his interest in Pakistan and requested him to share specific details of requirements for investing in the renewable energy sector of the country.

In response, the Vice Chairman of ACWA Power wrote a letter containing requirements for improving the viability of ACWA’s investment in Pakistan for developing renewable energy projects. The key requirements from their side include the following: (i) Bilateral G2G Framework, the necessity of a project reference to an established bilateral agreement between both countries, defining the terms and conditions of cooperation for enhancing investment feasibility and impact; (ii) Bankability of Project Agreements/Project Finance Basis.

Ensuring grid readiness for renewable energy

The availability of financeable agreements (Power Purchase Agreement, Implementation Agreement, Site Lease Agreement, and Grid Connection Agreement) based on the “project finance” approach, which relies on a dedicated financial structure focused on project cash flows and assets rather than the general financial conditions of the company or the government; (iii) Sovereign Guarantee, the presence of an executable sovereign guarantee within the scope of financial support, performance guarantees, financial guarantees, and the ability to monetize them, trusted by potential stakeholders in the project, including lenders and investors; (iv) Site allocation, completion of the allocation, licensing, and settlement of the designated development sites under a financeable land lease agreement that provides the right to use the land for the development, operation, and decommissioning of the station; and (v) Integration Transmission Studies, Integration studies with the national transmission network that confirms the availability of the necessary infrastructure for power evacuation.

Pakistan ambassador, in continuation of discussions with the Saudi side recently held two important meetings during the visit of the Energy minister on 9-11 January 2024 to participate in the Future Minerals Forum in Riyadh. The first meeting was with the Vice Chairman of ACWA Power Raad Al-Saady; and the second meeting was with the Saudi Energy Minister, HRH Prince Abdulaziz bin Salman Al-Saud.

In the meeting with ACWA Power, the vice chairman revealed that for ACWAs projects in Oman and the UAE, the tariff was as low as Cents 2/ kWh. This was possible because the risk profile of these projects was low. He referred to the suggestions made in his letter and explained that these measures will de-risk the projects for ACWA and will enable them to offer a better tariff to Pakistan. He also expressed ACWA’s readiness to cooperate with Pakistan to look for solutions for improving grid stability and address base-load issues using new technologies. The vice chairman expressed intent to visit Pakistan at the earliest to take forward the discussion.

The Pakistani ambassador further stated that the matter of ACWA Power was again discussed in the meeting with the Saudi Energy Minister. He offered his support and influence for facilitating discussions with the company. During the meeting he made a telephone call to the Chairman ACWA Power and urged him to urgently undertake a visit to Pakistan and finalize discussions on its investment in Pakistan.

“From these discussions, it is apparent that there is keenness on the Saudi side to fast track this project that is long over-due. We should expect ACWA Power’s visit in the next 2-3 weeks, for which our side needs to be fully prepared,” said the ambassador.

The ambassador further stated that with the adoption of the Inter-Governmental Commercial Transaction Act 2022, a framework law is available in the country for G2G agreements.

He said with regards to tariff discovery, from news reports, it is understood that the recent auction for 600 MW solar projects has not attracted any bid, however, the Government has simultaneously hired services of a consultant to advise it on a tariff that could be offered in G2G agreements. Therefore, he is close to addressing the two main issues that have prevented progress on this project in the past.

The ambassador requested Power Division to thoroughly evaluate all the requirements shared by ACWA Power and suggest two sets of dates for the visit of ACWA Power’s delegation to Pakistan. While considering next steps, Pakistan must not lose sight of the fact that ACWA Power’s investment in Pakistan is a test-case for Saudi Arabia, he added.

“Our success in materializing ACWA’s investment in Pakistan will be a great encouragement for other Saudi investors to follow suit,” the ambassador concluded.

Copyright Business Recorder, 2024

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