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Chinese investors given another extension for two CPEC projects


ISLAMABAD: The government on Tuesday gave another extension to Chinese investors for achieving financial close of two major power sector projects worth $2.2 billion under the China-Pakistan Economic Corridor (CPEC).

The projects given extensions include 4000MW Matiari-Lahore Transmission Line and 300MW Gwadar Coal Power Project.

At a meeting of the Private Power & Infrastructure Board (PPIB) presided over by Power Minister Omar Ayub Khan, the $1.7bn Matiari-Lahore line was given a three-month extension to achieve financial close with a fresh deadline of Feb 28, 2019.

The contractors were earlier given a six-month extension in financial close in March this year which ended on Dec 1. The new deadline was approved on assurance that commercial operation date (COD) of the project would remain unchanged at Mar 31, 2021. The delay was caused in firming up transmission line service agreement, finalisation of loan-related matters with the State Bank of Pakistan and problems in land leases.

“Keeping in view the importance of much needed +660kV High Voltage Direct Current (HVDC) Matiari-Lahore Transmission Line Project which is specifically designed to provide power evacuation for Thar coal-based power projects, the board has agreed to allow extension in letter of support (LoS) for achieving financial close,” said an official statement.

It was explained that it was the first HVDC line in the country and also the first private sector transmission project under CPEC which had achieved substantial progress. “Such extensions would not compromise the completion date of the project which is March 2021,” the statement said.

A special purpose vehicle (SPV) — Pak Matiari-Lahore Transmission Company Ltd (PMLTCPL) owned by three Chinese firms — was given a 25-year licence for the construction of 878-kilometre line by the power regulator in February this year.

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The SPV is owned by two Hong Kong-based companies: Zhong Cheng Xin International Ltd holding with a stake of 69.98 per cent and Zhong Zhuo Ye International Ltd 30pc. Both the entities are wholly owned by State Grid International Engineering Ltd, a 100pc subsidiary of China Electric Power Equipment and Technical Company, which in turn is 100pc owned by State Grid Cooperation of China.

The SPV is required under the licence to achieve COD of the line by Mar 1, 2021 and will be empowered under the licence to run it for 25 years. The project is expected to be completed at a cost of $1.7bn and the government is extending a series of tax concessions for it.

Likewise, the 300MW Gwadar coal-based power project was given a nine-month extension to achieve financial close until August 2019. The project has seen repeated delays in the past and saw changing investor portfolio.

Informed sources say the project still had many issues to resolve: contractors faced difficulties in land acquisition which has mostly been settled now but would require cost adjustments in the tariff while some delays were also caused due to environmental issues and internal management.

They added that there were still uncertainties over the project even though Pakistani authorities have been pushing for its completion to ensure uninterrupted power supply to Gwadar port and allied establishments. The board allowed a nine-month extension in its letter of intent until August 2019.

The PPIB said these extensions will enable sponsors to obtain tariff from the power regulator and LoS from PPIB, leading to financial close and help start construction to ensure much needed electricity to Gwadar to promote business for newly developed port, boost socio-economic activities and start the Special Economic Zones and Export Processing Zones in Gwadar.

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These activities will create employment opportunities and develop social facilities under Corporate Social Responsibility, the PPIB stated.

Ayub told board members that his ministry has taken the challenge of controlling theft and losses as well as overhauling transmission and distribution systems to remove bottlenecks in the supply of electricity to consumers.

He said sustainability in the system was only possible by bringing transparency in power system, induction of indigenous and renewable energy and introduction of new technology in transmission and distribution systems.

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