Latest news with #LoS
Business Recorder
03-05-2025
- Business
- Business Recorder
Coal-fired plant in Gwadar planned: CPPCL cites ‘snags' and ‘challenges'
ISLAMABAD: Chinese firm M/s CIHC Pak Power Company Limited (CPPCL), which plans to establish a 300 MW coal-fired power plant in Gwadar, has raised serious concerns over several critical challenges — including the approval of insufficient costs, exchange rate losses, and difficulties in converting foreign currency. In a letter addressed to Shah Jahan Mirza, Managing Director of the Private Power and Infrastructure Board (PPIB), CPPCL Chairman Zhao Bo stated that the company submitted the required Performance Guarantee (PG) on March 21, 2025, in compliance with PPIB's requirements. This extended the validity of the Letter of Support (LoS) to March 31, 2028, fulfilling all obligations under the LoS and PPIB's directives. Subsequently, on April 14, 2025, the company received a notice from PPIB requesting payment of the Financial Closing Date extension fee. Gwadar coal-fired power project in limbo over tariff dispute CPPCL emphasized that Clause 5 of the 2019 LoS clearly stipulates that 'delays caused by Government of Pakistan (GoP) entities' and 'events beyond the reasonable control of the Power Company' are valid grounds for exemption from the Financial Closing Date extension fee. Based on this clause, and after thorough evaluation, PPIB had approved the submission of the PG at the original amount — without requiring a doubled guarantee. 'In our previous communications with the Ministry of Planning, Development & Special Initiatives, and PPIB, we have detailed the reasons for the delays, including force majeure events and government-related delays, all of which are beyond the Power Company's reasonable control,' said Zhao Bo. He further argued that Clause 6 of the 2018 Fee Regulations must be interpreted in conjunction with Clause 5 of the LoS. According to him, PPIB's unilateral enforcement of the 2018 Fee Regulations violates key legal principles such as: (i) lexspecialisderogatlegigenerali (special law overrides general law),(ii) the principle of contractual reciprocity, and(iii) Pakistani laws and regulations that prohibit holding a party liable for losses without direct causation. Chairman Zhao warned that if PPIB enforces encashment of the PG solely due to non-payment of the extension fee, it would be a misuse of Clause 3 of the LoS, which limits PG encashment to scenarios involving 'failure to achieve the Financial Closing Date or execute agreements.' He also pointed to Clause 3A of the 2018 Fee Regulations — titled 'Exemption from Fees and Charges' — which applies to the LoS extension fee for this project. The regulation, effective July 1, 2022, states that power companies and sponsors are exempted from such payments if the delay in milestone achievement is due to timeline adjustments under IGCEP or attributable to government entities or factors beyond the sponsor's control. However, the exemption does not apply if the delay is also attributable to the power company or sponsor. Regarding the fee payment, CPPCL noted that the project has already incurred approximately $22 million in development costs, far exceeding NEPRA's approved cap of $10.5 million for development and owner management fees. Additionally, over $1 million has been paid in PPIB processing fees. Imposing further charges, the company argues, would severely impact the financial viability of the project. Nevertheless, to prevent further delays and safeguard the broader interests of the China-Pakistan Economic Corridor (CPEC), the company said it will pay $150,000 as a 'payment under protest' for the extension fee. This payment is made without prejudice to its right to: (i) seek compensation for excess costs through NEPRA with PPIB's support; (ii) recover unjust charges and related losses through legal or other means, and (iii) claim refunds under Clause 5 (Refund Clause) of the PPIB Fee Rules. The company also reiterated that despite receiving tariff approval with PPIB's support, it continues to face major challenges — including insufficient project cost approvals, exchange rate losses, currency conversion hurdles from the State Bank of Pakistan, tariff payment delays, and financing uncertainties. These challenges, it said, render the project commercially unviable in its current form. 'The true purpose of the LoS is to facilitate project advancement through PPIB's support,' the company stated, urging PPIB to act swiftly to resolve the issues that are threatening the project's commercial viability. The company affirmed its readiness to assist in finding solutions. Copyright Business Recorder, 2025
Business Recorder
28-04-2025
- Business
- Business Recorder
Kohala Hydropower Project: Chinese co urges Pakistan govt to extend LoS
ISLAMABAD: Chinese company M/s Kohala Hydropower Company Limited (KHCL) has requested the government to formally issue a notification extending the Letter of Support (LoS) for the $2.5 billion, 1,124 MW run-of-the-river Kohala Hydropower Project until September 30, 2027 as it has fulfilled all requisite formalities, sources within the company told Business Recorder. The Kohala Hydropower Project is a priority initiative under the China-Pakistan Economic Corridor (CPEC) framework. The original LoS was issued by the Private Power and Infrastructure Board (PPIB) on December 31, 2015, facilitating the successful negotiation and execution of key project agreements. Subsequently, the LoS validity was extended until September 30, 2027, as per the decision taken during the 144th meeting of the PPIB Board. LoS extension stays pending: Chinese firm agrees to delay Kohala project The Power Company in a letter to Power Division, has claimed that in compliance with the conditions precedent has submitted the requisite Performance / Bank Guarantee of $ 5.62 million to enable formal notification of extension in the LoS. According to the letter the Company has legitimate expectations for, issuance of extension in the LoS, premised on the following grounds :(i) the Project is being developed under CPEC Framework Agreement of November 08, 2014 between Government of China and Government of Pakistan, GoP's Power Generation Policy, 2002 and the AJ&K Power Generation Policy, 2002, reflecting its strategic significance and multi-jurisdictional transnational character; and (ii) the Company has executed all principal project agreements, including, Implementation Agreement (IA) with the Government of Pakistan on May 6, 2021, Tripartite Power Purchase Agreement (TPPA) with CPPA-G and NTDC on June 25, 2020, AJ&K Implementation Agreement (AJ&K IA) and Water Use Agreement (WUA) with the Government of AJ&K, on April 23, 2020; and Tripartite Agreement (TPA) between the Company, Government of Pakistan and Government of AJ&K on Jun 25, 2020. The Company has acquired approximately 4,607 Kanals of land for public purpose in connection with the Project's development, including activities related to financing, engineering, procurement, construction, operation, and maintenance on a Build-Own -Operate-Transfer (BOOT) basis. Compensation has been fully paid to the affected population in accordance with applicable laws. The Power firm further stated that as per the assumptions of the IGCEP 2022-2031 (Section 5.2) which were duly approved by the Council of Common Interests (CCI), a project is considered as 'committed' if it has obtained LoS from PPIB as of December 2020 for private sector projects and/or power generation projects which are listed under Federal Government's international bilateral or multilateral commitments The Project, in view of the specified criteria, is categorized as 'Committed Project' under the applicable and valid IGCEP 2022 - 2031, which stands duly approved by the NEPRA Authority through determination of February 1, 2023. The NEPRA Authority in its findings' in the approved IGCEP noted that emphasis has been placed on utilization of indigenous resources whereby more than 77% of the installed capacity will be based on the said sources. The NEPRA Authority further 'directed' the stakeholders that in the changing global dynamic there is a need to even further increase the use of indigenous resources of energy and same are made on priority. China Three Gorges argues that the Project has valid authorizations, approvals and consents, from the Government of China, Government of AJ&K and Government of Pakistan, to proceed under and pursuant to the Legal Framework and Contractual Framework. After explaining the background, the Chief Executive Officer of Kohala Hydropower Company, Liu Yonggang has submitted that the Project is fully compliant with and aligned to policy perspectives, contractual terms, and regulatory framework. Accordingly, the Project has satisfied all the conditions precedent for further advancement and development. 'We earnestly seek the esteemed support from Power Division in facilitating the prompt issuance of the formal notification for the extension of the LoS by PPIB until September 30, 2027. This timely action is pivotal to ensuring the uninterrupted progress of the $ 2.5 billion investment by China Three Gorges in the Kohala Hydropower Project-one of the most strategically important initiatives under the CPEC framework,' said the CEO. On October 4, 2024, Managing Director PPIB, Shah Jahan Mirza, through a letter informed the CEO of the Company that the Company's request regarding extension in the Financial Closing (FC) date of LoS of 1124 MW Kohala Hydropower Project was considered by PPIB Board in its 144th meeting held on September 18,2024. The Board decided to extend the FC date in the LoS of the project for 36 months period i.e. up to September 30, 2027 subject to extension of existing Bank Guarantee three months beyond the extended validity date of the LoS. MD PPIB had advised the CEO Kohala Hydropower Company to extend the validity of the banks guarantee up to December 31, 2027 and submit detailed bar chart identifying major milestones and timelines of various activities to be carried out up to FC i.e. September 30, 2027. Copyright Business Recorder, 2025
Business Recorder
28-04-2025
- Business
- Business Recorder
Kohala Hydropower Project: Chinese co urges govt to extend LoS
ISLAMABAD: Chinese company M/s Kohala Hydropower Company Limited (KHCL) has requested the government to formally issue a notification extending the Letter of Support (LoS) for the $2.5 billion, 1,124 MW run-of-the-river Kohala Hydropower Project until September 30, 2027 as it has fulfilled all requisite formalities, sources within the company told Business Recorder. The Kohala Hydropower Project is a priority initiative under the China-Pakistan Economic Corridor (CPEC) framework. The original LoS was issued by the Private Power and Infrastructure Board (PPIB) on December 31, 2015, facilitating the successful negotiation and execution of key project agreements. Subsequently, the LoS validity was extended until September 30, 2027, as per the decision taken during the 144th meeting of the PPIB Board. LoS extension stays pending: Chinese firm agrees to delay Kohala project The Power Company in a letter to Power Division, has claimed that in compliance with the conditions precedent has submitted the requisite Performance / Bank Guarantee of $ 5.62 million to enable formal notification of extension in the LoS. According to the letter the Company has legitimate expectations for, issuance of extension in the LoS, premised on the following grounds :(i) the Project is being developed under CPEC Framework Agreement of November 08, 2014 between Government of China and Government of Pakistan, GoP's Power Generation Policy, 2002 and the AJ&K Power Generation Policy, 2002, reflecting its strategic significance and multi-jurisdictional transnational character; and (ii) the Company has executed all principal project agreements, including, Implementation Agreement (IA) with the Government of Pakistan on May 6, 2021, Tripartite Power Purchase Agreement (TPPA) with CPPA-G and NTDC on June 25, 2020, AJ&K Implementation Agreement (AJ&K IA) and Water Use Agreement (WUA) with the Government of AJ&K, on April 23, 2020; and Tripartite Agreement (TPA) between the Company, Government of Pakistan and Government of AJ&K on Jun 25, 2020. The Company has acquired approximately 4,607 Kanals of land for public purpose in connection with the Project's development, including activities related to financing, engineering, procurement, construction, operation, and maintenance on a Build-Own -Operate-Transfer (BOOT) basis. Compensation has been fully paid to the affected population in accordance with applicable laws. The Power firm further stated that as per the assumptions of the IGCEP 2022-2031 (Section 5.2) which were duly approved by the Council of Common Interests (CCI), a project is considered as 'committed' if it has obtained LoS from PPIB as of December 2020 for private sector projects and/or power generation projects which are listed under Federal Government's international bilateral or multilateral commitments The Project, in view of the specified criteria, is categorized as 'Committed Project' under the applicable and valid IGCEP 2022 - 2031, which stands duly approved by the NEPRA Authority through determination of February 1, 2023. The NEPRA Authority in its findings' in the approved IGCEP noted that emphasis has been placed on utilization of indigenous resources whereby more than 77% of the installed capacity will be based on the said sources. The NEPRA Authority further 'directed' the stakeholders that in the changing global dynamic there is a need to even further increase the use of indigenous resources of energy and same are made on priority. China Three Gorges argues that the Project has valid authorizations, approvals and consents, from the Government of China, Government of AJ&K and Government of Pakistan, to proceed under and pursuant to the Legal Framework and Contractual Framework. After explaining the background, the Chief Executive Officer of Kohala Hydropower Company, Liu Yonggang has submitted that the Project is fully compliant with and aligned to policy perspectives, contractual terms, and regulatory framework. Accordingly, the Project has satisfied all the conditions precedent for further advancement and development. 'We earnestly seek the esteemed support from Power Division in facilitating the prompt issuance of the formal notification for the extension of the LoS by PPIB until September 30, 2027. This timely action is pivotal to ensuring the uninterrupted progress of the $ 2.5 billion investment by China Three Gorges in the Kohala Hydropower Project-one of the most strategically important initiatives under the CPEC framework,' said the CEO. On October 4, 2024, Managing Director PPIB, Shah Jahan Mirza, through a letter informed the CEO of the Company that the Company's request regarding extension in the Financial Closing (FC) date of LoS of 1124 MW Kohala Hydropower Project was considered by PPIB Board in its 144th meeting held on September 18,2024. The Board decided to extend the FC date in the LoS of the project for 36 months period i.e. up to September 30, 2027 subject to extension of existing Bank Guarantee three months beyond the extended validity date of the LoS. MD PPIB had advised the CEO Kohala Hydropower Company to extend the validity of the banks guarantee up to December 31, 2027 and submit detailed bar chart identifying major milestones and timelines of various activities to be carried out up to FC i.e. September 30, 2027. Copyright Business Recorder, 2025
