Chinese firm raises concerns over Gwadar coal project delays, tariff disputes

CPPCL highlights challenges including insufficient cost approvals, exchange rate losses, and financial closing date issues

The Chinese company M/s CIHC Pak Power Company Limited (CPPCL), which is set to establish a 300 MW coal-fired power plant in Gwadar, has raised significant concerns about the ongoing delays and financial challenges facing its project, Business Recorder reported.

In a letter to Shah Jahan Mirza, Managing Director of the Private Power and Infrastructure Board (PPIB), CPPCL Chairman Zhao Bo outlined several issues that have hindered progress, including insufficient project cost approvals, exchange rate losses, and difficulties in converting foreign currency.

According to the company’s communication, CPPCL submitted the required Performance Guarantee (PG) on March 21, 2025, which extended the validity of the Letter of Support (LoS) to March 31, 2028. Despite fulfilling all obligations under the LoS and PPIB directives, the company received a notice on April 14, 2025, demanding payment for the Financial Closing Date extension fee.

CPPCL has argued that, under Clause 5 of the 2019 LoS, delays caused by government entities or force majeure events should exempt the company from paying the extension fee. The company pointed out that PPIB had previously approved the PG at the original amount without the need for a doubled guarantee, based on earlier discussions that acknowledged the delays were outside the company’s control.

Zhao Bo also raised concerns about PPIB’s interpretation of the 2018 Fee Regulations, claiming that their enforcement contradicts established legal principles and the terms of the LoS. He warned that if PPIB proceeds to encash the PG due to the non-payment of the extension fee, it would be a violation of the agreed terms, as the PG was meant to be encashed only in cases of failure to meet key milestones.

In addition to these issues, CPPCL reported that the project has already incurred approximately $22 million in development costs, which far exceeds the approved cap of $10.5 million. The company has also paid over $1 million in processing fees to PPIB. It has stated that further charges would jeopardize the financial feasibility of the project.

To move forward and avoid additional delays, CPPCL has agreed to pay $150,000 under protest for the extension fee. However, it emphasized that this payment does not waive its rights to seek compensation for excess costs, recover unjust charges, or claim refunds in accordance with the terms of the LoS and PPIB rules.

Despite having received tariff approval with PPIB’s support, CPPCL continues to face several obstacles, including exchange rate losses, delays in tariff payments, and financing uncertainties. The company has warned that these unresolved issues threaten the project’s viability and called for PPIB to resolve these challenges promptly to ensure the continued progress of the China-Pakistan Economic Corridor (CPEC) initiative.

Monitoring Desk
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