PPIB to amend PPAs
MUSHTAQ GHUMMAN
ISLAMABAD: The Private Power Infrastructure Board (PPIB) is to amend Power Purchase Agreements (PPAs) of two coal-fired power plants, which have reluctantly accepted proposed Liquidated Damages (LDs), well informed sources told Business Recorder.
Giving details, the sources said, PPIB in its 115th meeting granted a 6-month extension to ThalNova Thar (Pvt.) Limited (TNTPL) and Thar Energy Limited (TEL) in the Finance Closure (FC) date up to September 7 – 8, 2018; subject to doubling the amount of Performance Guarantee (PG) and the condition that extension in FC would not affect the Rescheduled Commercial Operation Date (RCOD) of December 31, 2020. The Board had further advised that all efforts should be made to convince the project companies to pick, on a pro rata basis, the Transmission Service Charges (TSC) payable to the HVDC transmission line project due to non-utilization of its full capacity, in case the same are accrued due to delayed COD of the projects.
The sources further stated that in line with the Board decision, PPIB issued amendments to Letter of Support ( LoS) incorporating FC extensions to TNPTL and TEL with the condition that the project companies shall enter into respective amendments to the PPA with mutual agreement of the power purchaser whereby the companies, in addition to any other actions which may be taken against them under the PPA, shall be made liable to pay to the power purchaser, in the form of Liquidated Damages (as defined in the PPA) or any other appropriate manner under the PPA, a sum equivalent to the pro rata TSC assumed for the purposes of off-take under the TSA in respect of the project in the event that the project companies delay, default, or fail to achieve the COD of December 31, 2020. However, both companies have not accepted the amendment to LOS by sending the countersigned copy.
To resolve the issue a meeting was held in PPIB on May 18, 2018 with the representatives of TNTPL and TEL, participated by NTDC, CPPA-G and a representative of Power Division, wherein concerns of both the project companies with regard to prolonged processing/approvals by Chinese lead lenders and Sinosure as well as issues with SECMC regarding land allocated for construction of the ash yard and waste water pond were deliberated in the context of imposition of additional LDs over and above the already signed PPA; in light of the existing committed COD of the projects (i.e. December 31, 2020) and revised COD of the HVDC transmission line project of March 2021.
It was unanimously recommended in the meeting that in order to convince the project companies to pick the additional LDs by amendment in their respective PPAs, it would be prudent to allow them extension in their respective CODs till March 31, 2021; subject to approval of PPIB Board, given the fact that such extension will not add any financial burden to GoP.
The Chairman of PPIB Board solicited the comments of CEO CPPA-G in the matter who endorsed the proposed extension; adding that the extension in COD of both the companies till March 31, 2021 is a built-in extension in the context of CCoE decision which has already revised the COD date for HVDC transmission line project till March 31, 2021 and, accordingly, NTDC has already conveyed the revised COD of March 31, 2021 for both these Projects to CPPA-G following the decision of CCoE.
The MD PPIB in his briefing further stated that both companies have reluctantly accepted the proposed LDs, however, in return, apart from extending the COD dates, they have also asked to amend the relevant clause(s) of IA, whereby the existing 400-day default period (after which GoP is entitled to terminate the IA and exercise the option to take over the project) is increased to 500 days.
Secretary Planning Division opined that changing the project scheme midstream would not send a positive signal to the business community. It was clarified that the change in the PPA is actually in the interest of GoP and NTDC, and the project companies were convinced to pick the TSC in line with the earlier Board decision. Members also stressed upon the need to have a mechanism hindering the sponsors from going into litigation. It was clarified that as a matter of principle the right to litigation cannot be ruled out as per the laws.
The Board Chairman opined that the increase in the default period requires to be examined logically, and since PPIB is considering a 3-month (90 days) extension in the COD till March 31, 2021, hence a similar increase of 90 days should be allowed in the default period.
After deliberations, the Board keeping in view the ground realities of generation and transmission line projects and taking into consideration that there would be no adverse financial impact on GoP, granted a three-month extension in the COD for both the TNTPL and TEL till March 31, 2021 with the condition that each of TNTPL and TEL shall pay to CPPA-G by way of LDs a pro-rata amount equivalent to the Transmission Service Charge (TSC) payable by NTDC to Pak Matiari-Lahore Transmission Company Limited in case there is delay in achieving the RCOD under their respective PPAs. In return, Section 14.1(a)(ii) of the IA will be amended whereby the existing 400-day default period (after which GoP is entitled to terminate the IAs and exercise the option to take over the project) will be increased to 490 days.
The Board further advised that CPPA-G in order to make the PPA consistent with the IA may amend the relevant provisions thereof with the approval of its Board.
