Exim Bank agrees to extend $6.5bn credit

MUSHTAQ GHUMMAN

ISLAMABAD: Exim Bank of China has reportedly agreed to extend mixed credit of $6.5 billion for two 1100MW each nuclear power plants to be set up at Karachi coast, sources told Business Recorder.

ECNEC had approved the project at a cost of Rs958.8 billion with FEC of Rs727.8bn on Feb 21, 2013. Pakistan Atomic Energy Commission (PAEC) entered into contract agreement with M/s CNNC China for construction of the project at a cost of RMB 49bn ($7.903 billion). The ground breaking ceremony of the project was held on Nov 26, 2013.

According to sources, Exim Bank of China has agreed to provide mixed credit equivalent to 81.97 per cent ($ 6.5bn) of the contract price at a composite rate of 3.20pc per annum.

The financial package comprises of the following: (i) Government concessional loan of RMB 2.647bn (with interest @ 1pc per annum); (ii) preferential buyer credit of $4.001bn (with interest @ 2pc per annum); and (iii) buyer credit of $2.250bn (with interest @ 6pc per annum). The sources further stated that agreements for preferential buyers' credit were signed with the Exim Bank of China on Jan 14, 2014 after completing necessary formalities, including clearance from Finance Division and legal vetting by the Law Ministry. However, signing of the government's concessional loan was subject to prior signing of the inter-government framework agreement between the governments of China and Pakistan.

However, Chinese government indicated that the framework agreement could be signed during the visit of President of Pakistan to China in mid-February 2014. EAD completed all necessary formalities, including concurrence from Finance Division and legal vetting from the Law Ministry, for the draft framework agreement. Due to paucity of time, prime minister's approval was solicited under rule 16(2) of the Rules of Business, 1973.

The Prime Minister's Office intimated on Feb 18, 2014 that the PM had approved the proposal with the direction that the agreement should subsequently be placed before the cabinet for its formal approval. The inter-government framework agreement for government concessional loan of RMB 2.647bn was signed between the governments of China and Pakistan in Beijing during the visit of Pakistan's president to China.

After brief discussion, the cabinet considered the summary of Jan 9, 2015, submitted by the Economic Affairs Division (EAD) for formal approval of the inter-government framework agreement signed between governments of China and Pakistan for a concessional loan to finance the Karachi Nuclear Power Plant's K-2/K-3 projects and accorded approval.