CPEC power projects: government likely to extend supplemental agreement facility

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Islamabad: The federal government is likely to extend facility of supplemental agreement to all the present and future power projects of China Pakistan Economic Corridor (CPEC) after consultation with China, official sources told Business Recorder.

The Economic Co-ordination Committee (ECC) of the Cabinet on April 23, 2015 had approved the supplemental agreement in the following terms: “supplemental agreement may be approved with the provision that the revolving account (‘equal to 22% of monthly invoicing,) for the CPEC power projects shall be opened and maintained by the power purchaser for which the Ministry of Finance will provide guarantee to fund such revolving account in case the power purchaser fails to place and or maintain the required funds in such account.”

According to sources, since the ECC approved the supplemental agreement proposal specifically for coal based power projects under the China-Pakistan Economic Corridor Energy Project Cooperation Agreement on November 8, 2014, as such the facility of supplemental agreement with the provision of revolving account is limited to coal based projects only. However, the projects under the CPEC agreement also include other power projects which are required to be implemented on priority basis. Therefore, supplemental agreement needs to be available to all CPEC projects, the sources added.

The Ministry of Water and Power maintains that on the pattern of earlier decision, the following proposals should also be approved:(i) to extend the facility of supplemental agreement to all the projects enlisted or subsequently included in CPEC agreement by any amendment through mutual consent of the parties after approval of competent forums; and (ii) to approve the draft supplemental agreement for CPEC projects processed by the PPIB with the following changes: (a) Article 1: If, on the date of, or at any time after the signing of the Supplemental Agreement, the GOP grants to any company, any concessions, incentives or more preferable terms and conditions under applicable policy in relation to subjects specified under the CPEC agreement, the GoP agree to grant the company such preferable concessions, incentives of terms and conditions. (b) Article 2: revolving account (equal to 22 per cent of monthly invoicing) for the CPEC power projects shall be opened and maintained by the power purchaser for which the Ministry of Finance will provide the guarantee to fund such revolving account in case the power purchaser fails to place and or maintain the required funds in such account; and (c) Article 7: the term of Supplemental Agreement shall be commensurate with the term of Implementation Agreement (IA).

The sources maintained that in the draft supplemental agreement submitted by AEDB and circulated to various stakeholders for comments, its validity was linked with the term of the IA or till the project continues to be financed by Chinese banks. Whereas the term of supplemental agreement already approved by the ECC on April 23, 2015 is linked with the term of IA only and the approved agreement has also been signed with two project sponsors ie Sindh Engro Coal Mining Company and Port Qasim Electric Power Company.

Keeping in view the facts the supplemental agreements for CPEC projects submitted by PPIB and AEDB have been made uniform after internal discussion and their validity has been linked with the terms of the IA only, the sources continued.