Azad Pattan hydroelectric project: Sinosure hesitates to issue a LoS

ISLAMABAD: The China Export Credit Insurance Corporation (Sinosure), a state-funded insurance company, is reportedly reluctant to issue a Letter of Support (LoS) for Azad Pattan’s 700.7 MW hydroelectric project due to the ‘increasing circular debt and negative outlook for Pakistan’s power sector, knowledgeable PPIB sources said Business recorder.

This was revealed by M / s Azad Pattan Power, Pvt. Ltd (APPL) at a recent meeting held within the Private Power and Infrastructure Board (PPIB), convened to discuss the extension of the LoS validity date / financial close of the project.

The 700.7 MW Azad Pattan Hydroelectric Project, located on the Jhelum River at the dual border between AJ&K and the Punjab is developed under the provisions of the Government of Pakistan Policy (GoP) for Power Generation Projects 2002 by APPL including the China Gezhouba group as sponsors. The project is included in the Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30 approved by NEPRA and is part of the China-Pakistan Economic Corridor (CPEC) program. The project is at an advanced stage of development with only a few milestones pending, including the IRSA NOC, which is delaying the financial close of the project.

Agreement signed for the construction of the 700 MW Azad Pattan hydroelectric project

During the meeting, the project company indicated that Sinosure’s LoS is a prerequisite to confirm the financing agreement of Chinese banks; However, due to the increase in circular debt and the negative outlook for the Pakistani power sector, Sinosure is reluctant to issue a Letter of Support (LoS) for the project, thus delaying the conclusion of a financing agreement for the project.

The PPIB stressed that the funding arrangement is primarily the responsibility of the sponsors; therefore, they should follow up on the matter with Sinosure. The representative of Project Company informed that they used their good offices in China; therefore, due diligence of the project agreements has been carried out. Negotiated feasibility agreements pending execution subject to authorization from Sinosure and other financing documents, including security, are being negotiated and finalized.

Copyright Business Recorder, 2021

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