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January 17, 2016

1,320MW power projects under CPEC hit snags

National

January 17, 2016

Sindh government fails to implement land lease agreement

ISLAMABAD: Despite putting into prioritised list of the $46 billion China-Pakistan Economic Corridor (CPEC), important projects of 1320MW at Port Qasim Electric Power Company hit snags because of the Sindh government’s inability to implement land lease agreement so far, The News has learnt.

Top official sources disclosed to The News on Saturday that the issue of the registration of lease of land needs to be resolved by the end of March 2016, otherwise the multi-million dollar loan will be ceased and the completion guarantee issued by Power China Limited may be encashed by the lender, thus the project fails under the CPEC initiative. They said that the financial close of the project was agreed in November 2014 but nothing was done so far after repeated efforts from all ends.

“Since October 2014, several official letters have been written to higher authorities including the prime minister and minister of water and power but nothing happened to resolve the issue,” said an official who is involved in this project. To sort out teething problems of this project, the Planning Commission’s team headed by Member Implementation and Monitoring was sent to the site for physical review of the progress and timeline to complete this project by September, 2017.

All the civil works activities are on track whereas transmission line of 500KVA is also on schedule to be completed in July 2017 for test runs but the Sindh government is playing non proactive role to fail the important projects of the CPEC. The federal government plans to add 15,000MW power in the national grid by end 2017 with the support of provinces but it may not materialise keeping in view experience of these projects.

The Port Qasim Electric Company, the sponsor, has already paid the required amount for subject land lease registration. In this critical condition, the lender has extended the date up to March, 2016 and conditional financial close has been done to release required payment of $200 million.

If something happened to this project them rest of the investors will lose their interest also. The Port Qasim Electric Power Company (Pvt) Ltd. (“Project Company”) is undertaking the leading 1,320 (2x660)MW imported coal-fired power project at Port Qasim, Karachi. Project Company is a joint venture of Power Construction Corporation of China (POWERCHINA) and Al Mirqab Capital SPC, Qatar (AMC, together with POWERCHINA, the project sponsor).

The project is listed at no. 1 in the list of prioritized projects given in the agreement on CPEC Energy Project Cooperation dated November 8, 2014 executed by and between the government of the People’s Republic of China and the GOP (CPEC agreement). The project is intended to realise generation by the end of 2017.

After the signing of the Implementation Agreement (dated April 18, 2015 with PPIB, GOP) and the Power Purchase Agreement (dated April 18 with NTDC), in the presence of the Prime Minister Nawaz Sharif and Chinese President Xi Jinping, the construction works for the project are being rapidly undertaken by utilising the project sponsors’ upfront equity (and without waiting for financial closing) with a view to meeting the mutually agreed delivery deadlines and to start power generation at the earliest in the best interests of the government and the people of Pakistan.

“However, unfortunately, the issue of the registration of indenture of lease dated September 28 executed by Port Qasim Authority is still pending where the Sindh government could play a vital role to avoid failing of this project,” the sources concluded.

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