Kohala Hydropower Project Seeks LoS Extension

ISLAMABAD: M/s 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. Sources indicate that the company has met all necessary requirements.

The Kohala Hydropower Project is a key project within the China-Pakistan Economic Corridor (CPEC). The Private Power and Infrastructure Board (PPIB) initially issued the LoS on December 31, 2015, facilitating successful negotiations and agreements for the project.

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

LoS Extension Awaits

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

The letter asserts the company’s legitimate expectation for the issuance of the LoS extension, based on the following:

• 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. This reflects its strategic importance and transnational nature.
• The company has executed all major 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.
• Tripartite Agreement (TPA) between the Company, the Government of Pakistan, and the Government of AJ&K on June 25, 2020.

The company has acquired approximately 4,607 Kanals of land for public use for project development, covering financing, engineering, procurement, construction, operation, and maintenance on a Build-Own-Operate-Transfer (BOOT) basis. Compensation has been fully disbursed to the affected population in accordance with the law.

The power firm further explained that according to the assumptions in the IGCEP 2022-2031 (Section 5.2), approved by the Council of Common Interests (CCI), a project is considered ‘committed’ if it secured LoS from PPIB by December 2020 for private sector projects or those listed under the Federal Government’s international commitments.

Given these criteria, the Project is classified as a ‘Committed Project’ under the applicable and valid IGCEP 2022-2031, which was approved by the NEPRA Authority on February 1, 2023.

The NEPRA Authority noted in its findings within the approved IGCEP that emphasis has been placed on using indigenous resources, with over 77% of installed capacity based on these sources. NEPRA also directed stakeholders to further increase the utilization of indigenous energy resources as a priority in the changing global environment.

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

Following this explanation, Kohala Hydropower Company’s CEO, Liu Yonggang, affirmed that the Project aligns with policy perspectives, contractual terms, and the regulatory framework, and has satisfied all conditions necessary for further advancement and development.

“We seek the Power Division’s support in facilitating the prompt issuance of the formal notification for the LoS extension by PPIB until September 30, 2027. This action is crucial for the uninterrupted progress of China Three Gorges’ $2.5 billion investment in the Kohala Hydropower Project, a strategically important initiative under CPEC,” the CEO stated.

On October 4, 2024, PPIB Managing Director Shah Jahan Mirza informed the company’s CEO via letter that the PPIB Board considered the 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 decided to extend the FC date in the LoS for 36 months, until September 30, 2027, contingent upon the extension of the existing Bank Guarantee three months beyond the extended LoS validity date.

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