ISLAMABAD: National Electric Power Regulatory Authority (Nepra) on Tuesday hinted at granting extension for four months in Commercial Operation Date (COD) to Turkish power firm M/s Zorlu Enerji along with same tariff approved previously as the company has only one issue with CCPA-G, i.e., interpretation of word “degradation”.
Asian Development Bank’s Senior Investment Officer, Sheryar Ali Chaudhary said that financing is not easily available for Pakistan right now but the Bank is only considering Zorlu’s loan request because it has given a corporate guarantee.
He further stated that if the Regulator reviews tariff of Cents 3.9 per unit to the solar power project, then the project has to start afresh and also request four months’ extension in COD, starting from the date of issuance of determination.
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M/s Zorlu Enerji has filed a tariff modification motion against Nepra’s decision of July 26, 2023. The Authority in response to the Leave for Review, approved levelised tariff of US Cents 3.9017/kwh for 25 years for the project. The Authority awarded one of the lowest ever tariff for a solar power project to the Petitioner for setting up and operating the project and the petitioner since the award of tariff has been working towards implementing the project.
The Petitioner approached various development financial institutions (including but not limited to IFC, Asian Development Bank, Deutsche Investitions- und Entwicklungsgesellschaft (DEG), Proparco, British International Investment, etc.; however due to adverse macro-economic conditions prevailing in Pakistan particularly the challenges in the energy sector, most of the foreign lenders were reluctant to finance projects in Pakistan.
However, after several rounds of negotiations and months of deliberations, the Petitioner was able to secure the concept approval for the Foreign Finance Facility and the completion and signing of relevant term sheet, subject to the approval of this Modification Motion.
The representative of M/s Zorlu Enerji noted that arrangement of financing in Pakistan for a project is very difficult due to credit rating issue.
According to the company, three following reasons are basis for delay in COD: (i) change in the application of degradation mechanism and the complications related thereto; (ii) delay in adjudicating the Leave for Review and insufficient time left for the petitioner to achieve financial close date; and (iii) ongoing macroeconomic circumstances in Pakistan and difficulty in obtaining financing.
The power company intends to change its financing model, i.e., from total international financing to about 35 per cent local financing. However, the Regulator has asked the power company to share its financing plan with it, which can be further reviewed at the time of COD.
The Company’s representative further briefed the Authority that overall risk of Pakistan has significantly deteriorated since the original determination.
“It has become extremely difficult to obtain foreign financing (especially for power sector) as power sector specific issues like circular debt, delayed payments and renegotiation of the previously signed EPAs have made things difficult,” he said adding that if the Regulator touches the determined tariff of project, it will mean that the project is being restarted.
He further stated that the power company is in negotiation with a local consortium of banks led by Habib Bank of Pakistan.
The representative of Private Power and Infrastructure Board (PPIB) supported extension of four moths in COD as the PPIB Board will also approve it in its next meeting expected to be held during the second or third week of the current month.
The representative of CPPA-G also supported extension, saying that all the issues with the company have been sorted out except interpretation of ‘degradation of project’. CPPA-G said that it is referring the issue to the Regulator for interpretation which will be final.
As per the terms and conditions noted in Paragraph 18 of the Impugned Tariff Decision, the Petitioner has to achieve financial close (the Financial Close) within one year and four months from the date of issuance of the Tariff Determination, i.e., by December 11, 2023 (the Financial Close Date).
The power company has sought extension in Financial Close Date and keep the commercial operations date of the Project – 11 October 2024 (the Commercial Operation Date) – so that there is no impact on the actual application of the Impugned Tariff Decision. The company has also sought permission to fund a portion of the Finance Facility through Local Finance Facility which shall be adjusted on actual at the time of COD of the project.
The only tender conducted thus far was for 600-MWp solar project in Muzaffargarh in June 2023 which did not attract any bid(s) from either local or international investors.
