BNP Paribas, HSBC gets chichoki mallian project

Islamabad: The federal government has awarded financing mandate of 525 MW Chichoki Mallian thermal power project to a consortium of BNP Paribas and HSBC but arrangement for the rupee component was yet to be firmed, sources in PPIB said.

The contract to set up the 525 MW thermal power plant with an investment of $450 million at Chichoki Mallian (Sheikhupura) was awarded to Chinese company, Dongfang Electric Corporation (DEC) by the newly elected government on 30 March this year.

In view of the downgrading of Pakistan's credit risk and the fact that the second lowest bidder namely M/s Fortis Bank was not agreeable to meet the terms, the government has awarded the mandate to M/s BNP Paribas and HSBC on the following terms;

1) Coface component at fixed CIRR for 14.5 years

2) Sinosure component, preferably at Libor plus 87.5bp but with flexibility to accept 90bp above Libor as fall back position.

Sources said that Pakistan Electric Power Company (Pepco), currently headed by Fazal Ahmad Khan after the sacking of Munawar Baseer Ahmad, was in doubt if the Bank of Punjab was in a position to provide the rupee funds for the project. Some independent experts were of the view that the project cost agreed by the GoP could have been negotiated better. The DEC was already in the process of setting up thermal power plant of 450-500 MW at Nandipur (Gujranwala).

Former Prime Minister Shaukat Aziz had signed a memorandum of understanding (MoU) with the Qatar Investment Authority (QIA) and Alsthom-Marubeni to set up 450-500 MW thermal power plant at Chichoki Mallian, but it was terminated when the sponsors did not come up with the tariff petition.

The ECC, in its meeting on October 31, 2007, had directed the Ministry of Water and Power to issue a notice to the proposed sponsors, including Alsthom-Marubeni and the QIA, to come up with a deadline as to when they intend to file an application to the National Electric Power Regulatory Authority (Nepra) for tariff fixation and project completion to avoid any further delay.

The government of Pakistan had sent several letters to QIA for this purpose, but received no response despite the fact that gas allocation deadline of November 30, 2007, had passed.

The sources said that Marubeni had approached the Minister for Water and Power Raja Pervez Ashraf seeking his help to restore the agreement, but to no avail. An official told this scribe that the Chinese company would complete the project within the estimated cost of $330 million.