Kohala Hydropower Project Seeks Letter of Support Extension

ISLAMABAD: M/s Kohala Hydropower Company Limited (KHCL), a Chinese entity, has formally appealed to the government for an extension of the Letter of Support (LoS) for the $2.5 billion, 1,124 MW Kohala Hydropower Project. Sources within the company have indicated that the requested extension would push the LoS deadline to September 30, 2027, as the company has met all necessary prerequisites.

The Kohala Hydropower Project is a key component of the China-Pakistan Economic Corridor (CPEC). The Private Power and Infrastructure Board (PPIB) originally issued the LoS on December 31, 2015, which facilitated successful negotiations and the execution of critical project agreements.

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

Pending LoS Extension

The power company stated in a communication to the Power Division that it has provided the required Performance / Bank Guarantee of $5.62 million, fulfilling the conditions precedent for the formal notification of the LoS extension.

According to the letter, the company has a well-founded expectation for the LoS extension, based on the following factors:

  • The project is being developed under the CPEC Framework Agreement dated November 8, 2014, between the Chinese and Pakistani governments, as well as Pakistan’s Power Generation Policy, 2002, and the AJ&K Power Generation Policy, 2002, highlighting its strategic importance and transnational nature.
  • The company has finalized all major 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 also acquired approximately 4,607 Kanals of land for the project’s development, including financing, engineering, procurement, construction, operation, and maintenance activities on a Build-Own-Operate-Transfer (BOOT) basis. All affected individuals have been fully compensated in accordance with applicable laws.

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

The project is therefore classified as a ‘Committed Project’ under the IGCEP 2022-2031, which was approved by the NEPRA Authority on February 1, 2023.

NEPRA’s findings in the approved IGCEP emphasized the utilization of indigenous resources, with over 77% of installed capacity based on these sources. NEPRA also directed stakeholders to further increase the use of indigenous energy resources as a priority in the changing global environment.

China Three Gorges asserts that the project has the necessary authorizations, approvals, and consents from the Chinese, AJ&K, and Pakistani governments to proceed under the existing legal and contractual frameworks.

Kohala Hydropower Company CEO Liu Yonggang stated that the project aligns with policy perspectives, contractual terms, and regulatory frameworks and has met all conditions for further progress.

“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, PPIB Managing Director Shah Jahan Mirza informed the company CEO via letter that the PPIB Board considered the request for an extension of the Financial Closing (FC) date for the 1124 MW Kohala Hydropower Project’s LoS during its 144th meeting on September 18, 2024. The Board agreed to extend the FC date in the project’s LoS by 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 to December 31, 2027, and to provide a detailed bar chart outlining major milestones and timelines for activities up to the FC date of September 30, 2027.