Kohala Hydropower Project Seeks LoS Extension

ISLAMABAD: M/s Kohala Hydropower Company Limited (KHCL), a Chinese firm, has formally appealed to the government for a notification extending the Letter of Support (LoS) for the $2.5 billion, 1,124 MW Kohala Hydropower Project until September 30, 2027. According to sources within the company, KHCL has completed 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) initially issued the LoS on December 31, 2015, which facilitated successful negotiations and the execution of crucial project agreements.

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

Pending LoS Extension

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

The letter asserts the company’s firm expectation for the LoS extension, based on these factors:

  • The project’s development falls under the CPEC Framework Agreement of November 8, 2014, between the Chinese and Pakistani governments, Pakistan’s Power Generation Policy of 2002, and the AJ&K Power Generation Policy of 2002. This underscores its strategic importance and transnational character.
  • The Company has finalized all primary 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 the project’s development, including activities related to financing, engineering, procurement, construction, operation, and maintenance on a Build-Own-Operate-Transfer (BOOT) basis. It has also fully compensated the affected population in accordance with applicable laws.

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

Given these criteria, the project is categorized as a ‘Committed Project’ under the valid IGCEP 2022-2031, 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 the installed capacity based on these sources. NEPRA also directed stakeholders to further increase the use of indigenous energy resources as a priority in the evolving global landscape.

China Three Gorges asserts that the project possesses valid authorizations, approvals, and consents from the Governments of China, AJ&K, and Pakistan, enabling it to proceed under the relevant legal and contractual frameworks.

Following this explanation, Kohala Hydropower Company CEO Liu Yonggang stated that the project aligns fully with policy perspectives, contractual terms, and the regulatory framework, meeting all conditions required for its continued progress.

“We urgently request the Power Division’s support in promptly issuing the formal notification for the LoS extension by PPIB until September 30, 2027. This timely action is crucial for ensuring the uninterrupted advancement of the $2.5 billion investment by China Three Gorges in the Kohala Hydropower Project, a strategically significant initiative 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 reviewed 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 agreed to extend the FC date in the LoS for 36 months, until September 30, 2027, contingent upon extending 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 bank guarantee’s validity to December 31, 2027, and submit a detailed bar chart outlining major milestones and timelines for activities leading up to the FC on September 30, 2027.