ISLAMABAD: Minister for Energy, Omar Ayub Khan has reportedly resigned as Chairman Board of PPIB (Private Power & Infrastructure Board) due to which approvals of private sector power projects have stalled, well-informed sources in PPIB Business Recorder.
The PPIB is facing a similar difficulty in granting extension in Financial Close period to a company which will establish 300MW coal-fired power plant at Gwadar under the China Pakistan Economic Corridor (CPEC). Ministry of Energy is already under harsh criticism due to June petrol crisis, after two of Special Assistants to the Prime Minister allegedly played some role in the scam.
Sharing the details, sources said, the Government of Pakistan and Government of China entered Pakistan Economic Corridor Energy Project Cooperation on November 8, 2014 pursuant to which an approximately 300 (150 x 2) MW gross ISO) coal-fired electric generation complex to be located in Gwadar, Balochistan was conceived and approved. Accordingly, the Economic Coordination Committee (ECC) on March 30, 2017 in terms of Rule 5 of PPRA Rules 2004 authorized PPPIB to proceed for award of the project to M/s CIHC Pak Power Company Limited also termed as designated project under Power Generation Policy 2015. Accordingly, PPIB issued Letter of Intent (LoI) and later after its tariff determination by National Electric Power Regulatory Authority (NEPRA) issued Letter of Support (LoS) to the company.
As per the terms of the Policy and the LoS, the company is required to execute Implementation Agreement (IA) and Power Purchase Agreement (PPA) substantially as per standard draft approved by ECC on March 19, 2015, April 23, 2015 and April 28, 2017. The standard IA provides protection against expropriation, political force majeure risks, change in law etc. and also lays down provisions of compensation amounts in case of termination of the IA in the event of default and issuance of guarantee to cover payment obligations of the power purchaser under the PPA.
The ECC in its decision of March 19, 2015 also authorized the Board of PPIB to negotiate and approve project specific changes in the standard draft of IA. Accordingly, the company and PPIB after various rounds of negotiations finalized project specific IA for the project. Furthermore, a supplemental Agreement has also been finalized with the company that “mirrors” the provisions of the CPEC Agreement.
Earlier, ECC approved standard PPA for coal power projects which was meant to be executed between the project company and the National Transmission and Despatch Company (NTDC) being power purchaser on behalf of Discos. However, after hiving-off of Central Power Purchasing Agency Guarantee Limited (CPPA-G), as a separate corporate entity, from the NTDC various Power Purchase Agreements were executed with CPPA-G with a back-to-back arrangement with NTDC in relation to interconnection, despatch and other matters falling in latter's mandate.
On the other hand, the Gwadar project for some initial years would remain operative on local isolated grid of 132KV owned and operated by Quetta Electric Supply Company Limited (QESCO) and thereafter when a new transmission line would be constructed, it will be connected with the National Grid owned and operated by NTDC.
Furthermore, the project will be issued dispatch instruction by the system operator commonly known as National Power Control Centre (NPCC) currently operating under the NTDC. Due to this unique nature of responsibilities divided amongst three public sector entities, now the project specific Power Purchase Agreement was required to be executed amongst the CPPA-G. NTDC, QESCO and the company. Accordingly, the company negotiated and finalized project specific quadripartite Power Purchase Agreement (OPPA) with the CPPAG, the NTDC and the QESCO essentially to provide comfort to the company against multiplicity of claims and to limit its exposure for recourse and their respective boards have accorded their approval.
PPIB argued that pursuant to terms and conditions of the LoS, the company is required to achieve Financial Close by January 31, 2021. However, due to events beyond reasonable control of the company i.e. previous delays in land acquisition, environmental approvals and recent delays in negotiations, approvals in signing off of QPPA by GoP entities and achievement of Financial Closing by January 31, 2021 is practically not possible. Hence the company has requested extension in Financial Close date up to February 28, 2023 i.e. for 25 months.
As per clause 8.4 (ii) (c) if any extension in the validity of LoS is necessitated due to delays on part of GoP entities or for the reasons which are beyond reasonable control of the sponsors, the Board of PPIB may grant extension without doubling the bank guarantee with appropriate terms and conditions.
In view of facts and circumstances as averred by the company, PPIB has considered that a delay of only upto twelve months is justified and accordingly extension in the Financial Closing Date commensurate with such delay may be granted to the company however, the company will start project construction from its equity and achieve COD, i.e., June 30, 2023.
According to sources, ex officio Chairman of PPIB Board, the Federal Minister for Energy, who was exclusively mandated to convene and preside over or direct any other members to preside over the Board meeting under the Private Power & Infrastructure Board Act 2012 (Act vi of 2012) has tendered resignation due to which the Board of PPIB has been rendered non-functional.
The approval of project specific IA, extension in the Financing Closing Date and Supplemental Agreement are mandate of the PPIB Board which is not possible due to non- functioning of the Board, hence causing an undue delay in the development of the Gwadar Project, a strategic project of national importance. It is, therefore, imperative that the agreements are executed without any further delay so that project sponsors may kick-start construction at site at the earliest.
After explaining the entire scenario, PPIB has requested ECC to consider approving the project specific Implementation Agreement and the Supplemental Agreement to the Implementation Agreement placed and authorized by the Managing Director PPIB or in his absence Director Legal PPIB to sign and execute such agreements with M/s CIHC Pak Power Company Limited.
PPIB has also sought approval of project specific quadripartite Power Purchase Agreement and considered and approved a one year extension in the Financial Closing Date up to January 30, 2022 without doubling the existing Bank Guarantee, subject to fulfillment by the Company of other codal formalities.
An insider claimed that the Minister has tendered his resignation as Chairman PPIB Board, AEDB Board and Hydrocarbon Development Institute of Pakistan (HDIP) in the light of discussions by the Minister for Law and Justice in the Cabinet meeting.
Copyright Business Recorder, 2020
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