[CPEC, IPP] China Eximbank and CDB provide syndicated loan for 900 MW Solar Power Plants at Quaid-e Azam Solar Park (Linked to Record ID#53985, #53988, #53989, #54283, #54284, #54285, #54286, #54287)

China Eximbank and CDB provide syndicated loan for 900 MW Solar Power Plants at Quaid-e Azam Solar Park in 2016 According to a 2016 Annual Report from China Development Bank (CDB), CDB and China Eximbank provided a syndicated loan to Zonergy, a ZTE Corporation subsidiary, for the 9 x 100 MW Solar Power Plants Construction Project in Quaid-e Azam Solar Park.

The monetary face value of this loan is unknown. The borrowing terms are unknown. It is unclear when exactly these banks committed financing to Zonergy for this project.

A 2016 Government of Pakistan Bond Prospectus claims that the total project cost is USD 1.35 billion but the China-Pakistan Economic Corridor (CPEC) website claims it is USD 1.5 billion. The Quaid-e-Azam Solar Park is in Lal Suhanra, Cholistan, Bahawalpur, Punjab, Pakistan. It consists of two solar projects - the 100 MW solar power project of QA Solar Pvt.

Ltd. and the 9 x 100 MW Solar Project of Zonergy. The former is complete and supplying electricity to the national grid as of the end of 2015. The latter was being developed in two phases of 300 MW and 600 MW.

The 3 x 100 MW Solar Projects have been completed and the 6 x 100 MW Solar Projects are under litigation due to dispute on tariff as of May 2016.

According to a license application document submitted to National Electric Power Regulatory Authority (NEPRA), Zonergy created five subsidiaries and ten special purpose vehicles (SPV) for the 9 Xx100 MW Solar Power Projects.

The five subsidiaries are Apollo Solar Development Limited, Best Green Energy Limited, Crystal Energy Limited, Dragon Solar Development Limited, and Elbel Green Energy Limited.

The ten SPVs are Apollo Solar Development Pakistan Limited (Record ID#53985 and #54287), Best Green Energy Pakistan Limited (Record ID#53989, #54285, and #54286), Crest Energy Pakistan Limited (Record ID#53988, #54284, and #54283), Dragon Solar Development Pakistan Limited, Elbel Green Energy Pakistan Limited, Flare Solar Development Pakistan Limited, Golden Eye Solar Development Pakistan Limited, High Flying Solar Development Pakistan Limited, Indigo Solar Development Pakistan Limited, and King Rider Solar Development Pakistan Limited.

However, this project has encountered a number of debt repayment and financial management challenges since the various solar power plants went into operation.

In May 2022, reports emerged that the Government of Pakistan’s Central Power Purchasing Agency (CPPA) had fallen behind on payments (for the purchase of electricity) to Zonergy and its subsidiaries/SPVs. Total payment arrears, at that time, amounted to PKR 10.4 billion (approximately $52 million).

Several months later, on October 26, 2022, Sinosure informed the Government of Pakistan that it would not be able to provide credit insurance for any additional projects in Pakistan without ‘early resolution of [the] Revolving Account Agreement (RAA) pending between Central Power Purchasing Agency (CPPA) and Chinese IPPs since 2017’.

Under a November 8, 2014 CPEC Energy Project Cooperation Agreement, the CPPA and Chinese IPPs had agreed on the establishment of an RAA to facilitate the automatic payment of at least 22% payables to IPPs directly through the recovery of electricity bills of distribution companies (so-called ‘discos’).

However, ‘due to various technical and financial constraints’, the Government of Pakistan’s Power Division acknowledged that the RAA had not been implemented over the previous 5-year period.

In May 2022, an effort to establish an RAA was undertaken by the Government of Pakistan, but it was ultimately unsuccessful.

Then, on October 31, 2022, Pakistan’s Ministry of Finance came up with an interim arrangement for the Power Division to open ‘an assignment under the title of Pakistan Energy Revolving Fund (PERF) till such time matters pertaining to RAA are resolved’.

The escrow account was to be opened at the National Bank of Pakistan and operated by the CPPA and PKR 50 billion was to be allocated from the Ministry of Finance’s subsidy account to the PERF with a monthly withdrawal limit of PKR 4 billion (against invoices from IPPs).

The Government of Pakistan acknowledged, at the time, that this “[would] not fully fulfill the revolving account requirements under the RAA, but it [would] provide additional comfort to Chinese IPPs’.

Then, in November 2022, the Economic Coordination Committee (ECC) of the Cabinet turned down a proposal by the Ministry of Energy (Power Division) for the PERF (escrow) account to be operated by the National Bank of Pakistan.

It decided that the account would instead be operated by the country’s central bank: the State Bank of Pakistan (SBP).