The second phase of China-Pakistan Economic Corridor (CPEC) has been hit with huge delays and impediments due to the non-payment of dues by the government.
The latest project affected by this is the 300MW coal-fired Gwadar power project. Reportedly the Chinese loan insurance company M/s Sinosure has stated that it is unwilling to cover governmental breach risk under the medium and long term buyer credit insurance largely due to delayed payments to CPEC IPPs and delay in opening of revolving account and renegotiations of PPAs with existing IPPs.
In view of the existing situation, lenders have informed by CIHC Pak Power Company Limited (CPPCL), that sponsors are required to provide joint and several liability guarantees covering full repayment period, which would greatly exceed the industry practice of providing completion guarantees during construction period. However, sponsors’ stance is that they have already injected substantial equity in the project, and are not willing to accept this requirement of lenders. As a result, construction at site has been suspended until financing arrangement is finalized among lenders, Sinosure and sponsors.
Private Power and Infrastructure Board (PPIB) has repeatedly stated that the requested change in RCOD to 2025 will substantially delay the development of Gwadar as an international logistics hub and allied infrastructure since the development and operations of Gwadar industrial city is contingent upon reliable electricity supply.
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