Kohala Power Plant: Chinese firm reluctant to accord approval

INTERNATIONAL DESK: China Export & Credit Insurance, Sinosure, is reportedly reluctant to accord approval to 1124-MW Kohala Hydropower Project in AJ&K, a project of CPEC, owing to overdue payment of other CPEC projects in operation, sources close to Managing Director Private Power & Infrastructure Board (PPIB) told Business Recorder.

The Government of Pakistan owes an amount of over Rs 300 billion to power projects established under the CPEC umbrella, which are now seeking help from Chinese embassy in Islamabad for payments not cleared so far due to financial crunch which has also hiked circular debt to Rs 2.5 trillion.

International Monetary Fund (IMF) and World Bank are urging Pakistani authorities to get relief in tariff from Chinese power projects on the pattern of other Independent Power Producers (IPPs).

The sources said, recently, a meeting was held to review the progress of development activities and issues relating to 1124-MW Kohala Hydropower Project which was attended by representatives of stakeholders namely KHCL, GoAJ&K (Finance Department, Inland Revenue, Electricity Department/, Ministry of Energy (Power Division), NEPRA, CPPAG, CPEC Authority and PPIB.

The meeting highlighted that all major issues have been resolved on part of the Government of Pakistan and the Government of AJ&K entities and now the Company should move ahead to achieve Financial Closing in a timely manner.

Chief Executive Officer, Kohala Hydro Company (Pvt) Ltd. (KHCL) appreciated PPIB for organizing the meeting and requested for cooperation and facilitation for expediting the remaining ongoing activities.

Some outstanding issues were discussed at a recent meeting presided over by Managing Director PPIB wherein way forward was suggested.

On the issue of WHT on Offshore Supply Contract (OSC), the meeting was informed that AJ&K Cabinet on March 10, 20222 approved WHT on OSC @ 1 per cent fixed and final liability for CPEC power projects which will be presented in AJ&K Assembly for its concurrence within four weeks.

The meeting directed Inland Revenue Go&AJK to get concurrence of the AJ&K Assembly on WHT on OSC @ 1 per cent fixed and final liability for CPEC power projects within four weeks.

On the issue of land acquisition, the meeting was informed that out of total required 8600 kanals of land, awards of about 4600 kanals have been issued by GoAJ&K under LAA 1894 and KHCL has so far paid Rs 1.53 billion. However, Board of Revenue (BoR) AJ&K is yet to provide differential cost estimate to move ahead in the matter of LAA 1894 verses LAA 2020.

The BoR (AJ&K) stated that non-paper cost estimate will be ready in next two weeks which will be shared with KHCL and PPIB.

The meeting was further informed that despite Federal Government decision, NEPRA did not allow additional cost of Sewerage Treatment Plants (STPs) and that KHCL through CPPA-G has filed a review petition before NEPRA which is in process of admission and subsequent actions.

During the meeting, consensus was reached that all relevant entities will support such cost adjustment in line with ECC decision to mitigate the adverse impact of the project and safeguard the environmental interest of the local population.

The meeting urged NEPRA to expedite process on review motion with the request to achieve win-win scenario for all stakeholders so that development of this mega CPEC hydropower project could progress smoothly.

Sponsors stated that due to overdue payment of other CPEC projects in operation, the Sinosure is reluctant to issue its approval for the project. However, sponsors are following up consistently with relevant departments of Chinese government. It was further noted that during last apex visit of Pakistani officials in March 2022, the Sinosure issue was taken up with the Chinese side and it is expected that the issue will be resolved soon. However, if any further higher-level efforts are required that will also be made for materializing the project.

The meeting decided that the matter of Sinosure be taken up again at higher level between Government of Pakistan and Government of China. M/s KHCL, through its head office shall also follow up consistently with relevant departments of Chinese government for issuance of Sinosure approval.

“The meeting recognized that Sinosure is the only serious issue. PPIB and KHCL will put up a joint effort for early resolution through proper channels by engaging at higher levels of the GoP and Chinese government,” the sources said. (Business Recorder)