Kohala Hydropower Project Seeks Extension of Letter of Support

ISLAMABAD: Kohala Hydropower Company Limited (KHCL), a Chinese firm, has formally requested the government to issue a notification extending the Letter of Support (LoS) for the $2.5 billion, 1,124 MW Kohala Hydropower Project until September 30, 2027. Company sources confirmed to Business Recorder that this request follows the fulfillment of all necessary requirements.

The Kohala Hydropower Project, a run-of-the-river initiative, holds significant importance within the China-Pakistan Economic Corridor (CPEC). The Private Power and Infrastructure Board (PPIB) initially issued the LoS on December 31, 2015, which facilitated successful negotiations and the execution of crucial project agreements.

The validity of the LoS was subsequently extended to September 30, 2027, a decision reached during the 144th meeting of the PPIB Board.

Pending LoS Extension

In a letter addressed to the Power Division, the Power Company asserted that it has met the precedent conditions by submitting the required Performance / Bank Guarantee of $5.62 million. This submission is intended to enable the official notification of the LoS extension.

The company stated in its letter that it has valid grounds for anticipating the issuance of the LoS extension, primarily because:

  • The project is being developed under the CPEC Framework Agreement of November 8, 2014, between the Governments of China and Pakistan, along with Pakistan’s Power Generation Policy, 2002, and the AJ&K Power Generation Policy, 2002, which highlights its strategic and transnational significance.
  • The Company has finalized all key project agreements, including an Implementation Agreement (IA) with the Government of Pakistan on May 6, 2021, a Tripartite Power Purchase Agreement (TPPA) with CPPA-G and NTDC on June 25, 2020, an AJ&K Implementation Agreement (AJ&K IA) and Water Use Agreement (WUA) with the Government of AJ&K on April 23, 2020, and a Tripartite Agreement (TPA) between the Company, the Government of Pakistan, and the Government of AJ&K on June 25, 2020.

The company has acquired around 4,607 Kanals of land for public use concerning the project’s development, which includes financing, engineering, procurement, construction, operation, and maintenance on a Build-Own-Operate-Transfer (BOOT) basis. Full compensation has been disbursed to the affected population, adhering to all relevant laws.

The power firm also noted that the IGCEP 2022-2031 (Section 5.2), approved by the Council of Common Interests (CCI), classifies a project as ‘committed’ if it secured an LoS from PPIB by December 2020 for private sector projects or if it is listed under the Federal Government’s international bilateral or multilateral commitments.

Based on these criteria, the Project is recognized as a ‘Committed Project’ under the current IGCEP 2022-2031, which was officially approved by the NEPRA Authority on February 1, 2023.

NEPRA Authority, in its findings within the approved IGCEP, highlighted the emphasis on utilizing indigenous resources, with over 77% of the installed capacity relying on these sources. The NEPRA Authority also ‘directed’ stakeholders to further prioritize the use of indigenous energy resources in response to the evolving global landscape.

China Three Gorges maintains that the Project possesses valid authorizations, approvals, and consents from the Governments of China, AJ&K, and Pakistan, enabling it to proceed under the Legal and Contractual Frameworks.

Following this explanation, Liu Yonggang, the Chief Executive Officer of Kohala Hydropower Company, affirmed that the Project is fully aligned with policy perspectives, contractual terms, and the regulatory framework. He asserted that the Project has satisfied all conditions necessary for its further advancement and development.

“We earnestly seek the esteemed support from the 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,” the CEO stated.

On October 4, 2024, Shah Jahan Mirza, Managing Director of PPIB, informed the CEO of the Company through a letter that the PPIB Board had considered the Company’s request for an extension in the Financial Closing (FC) date of the LoS for the 1124 MW Kohala Hydropower Project during its 144th meeting on September 18, 2024. The Board agreed to extend the FC date in the project’s LoS for 36 months, i.e., until September 30, 2027, contingent upon the extension of the existing Bank Guarantee three months beyond the extended validity date of the LoS.

MD PPIB advised the CEO of Kohala Hydropower Company to extend the validity of the bank guarantee until December 31, 2027, and to submit a detailed bar chart outlining major milestones and timelines for various activities to be completed up to the FC date of September 30, 2027.