Completed Mixed AidData Chinese Aid

China Eximbank provides RMB 100 million for 100MW Solar Power Plant in Quaid-e Azam Solar Park (Linked to Record ID#50939, #53988, #54284)

¥100M RMB

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Crest Energy Pakistan Limited (CEPL)
Country	Pakistan
Start Date	Dec 21, 2015
End Date	Sep 24, 2028
Duration	4,661 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`54283`

Grant Description

China Eximbank provides RMB 100 million for 100MW Solar Power Plant in Quaid-e Azam Solar Park On December 21, 2015, Crest Energy Pakistan Limited (CEPL) — a special purpose vehicle (SPV) that is legally incorporated in Pakistan and a wholly-owned subsidiary of Zonergy (a subsidiary of ZTE Corporation) — signed a Sinosure-backed term facility agreement with China Eximbank and China Bohai Bank for the 100MW Crest Energy Pakistan Limited Solar Power Plant at Quaid-e Azam Solar Park Project.

The term facility (loan) included three tranches.

📋 Loan / Grant Terms

💰 Loan Amounttranches to CEPL: (1) an RMB 100 million loan tranche with a 2

💹 Interest Rate2.65%

📋 Loan / Grant Terms

💰 Loan Amountworth $56

Under all three loan tranches, the borrower was expected to make 48 consecutive, quarterly principal payments.

CEPL was expected to use the loan proceeds to partially finance two commercial (EPC) contracts (with an aggregate value of RMB 984 million) with China First Metallurgical Group Co. Ltd. and MCC Ruba International Construction Company Pvt. Ltd., which it signed on June 27, 2015. CEPL achieved financial close on December 28, 2015, which is typically the date of the first loan disbursement.

The purpose of the project to build, own, and operate a 100MW solar power plant in Quaid-e-Azam Solar Park at Lal Sohanra in Cholistan, within Bahawalpur District in the Province of Punjab. The project was implemented on a build, own and operate (BOO) basis.

It was originally envisaged that the total cost of the project would be $151.431 million and it would be financed according to a debt-to-equity ratio of 75:25.

However, the (final) total cost of the project was $149.457 million and it was financed according to a debt-to-equity ratio of 75.39:24.61. China First Metallurgical Group Co. Ltd. and MCC Ruba International Construction Company Pvt. Ltd. were the EPC contractors responsible for project implementation.

The power plant achieved its commercial operations date. (COD) on May 31, 2016.

However, the project appears to have encountered debt repayment and financial management challenges after the power plant went into operation.

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).’

📋 Staff Comments

According to multiple, official sources, the Government of Pakistan has issued sovereign guarantees in support of all loans issued by Chinese state-owned banks for independent power projects (IPPs) in Pakistan (see https://www.fmprc.gov.cn/ce/cepk/chn/zbgx/t1735166.htm and http://pk.chineseembassy.org/eng/zbgx/202110/t20211010_9558510.htm and https://www.dropbox.com/s/bmx3w2b38o7guxm/Debt%20Pricing%20of%20IPPs%20%28002%29.pdf?dl=0). As such, AidData assumes that the loan captured in this record is backed by a sovereign guarantee from the Government of Pakistan. However, Pakistan's Ministry of Finance officially classifies all IPP debt as 'private debt'.
On November 8, 2014, the Chinese Government and the Government of Pakistan signed a CPEC Energy Project Cooperation Agreement. According to Article 5 of the Agreement, ‘the Pakistani Party agrees that a revolving account shall be opened with 30 days of commercial operation of the respective project, into which the money, no less than the 22 per cent of the monthly payments for the respective power project under the agreement shall be deposited to provide cover for the shortfall in power bill recoveries from the date of power generation of the said projects agreements subject to the condition that the additional direct and indirect expenses incurred in maintaining the revolving account would be compensated by the producers through a discount arrangement to be mutually agreed.’ Subsequently, the Finance Division, in consultation with the Power Division, finalized a mechanism for the Revolving Account (RA) with the approval of The Minister of Finance in a letter dated June 22, 2015. Then, in September 2017, the Power Division forwarded a draft Revolving Account Agreement (RAA) to be signed between Central Power Purchasing Agency-Guaranteed (CPPA-G) and power producer(s) to the Finance Division. CPPA-G subsequently executed the finalized draft of RAA with multiple CPEC IPPs. The Government of Pakistan also guaranteed the funding obligations of the CPPA with respect to the RAA, through Supplemental Implementation Agreements signed between the Government of Pakistan — through the Private Power and Infrastructure Board (PPIB) — and the respective IPPs.
This is one of ten solar power plants at Quaid-e-Azam Solar Park financed by CDB and China Eximbank (captured via Umbrella Record ID#50939).
The length of the grace period that applied to the term facility agreement is unknown. For the time being, AidData assumes that it carried a grace period of 0.443-years (equivalent to the number of days that elapsed between the loan commitment date and COD).

📚 Sources & References

Decision of the Authority in the matter of Tariff Adjustment at Commercial Operation Date (COD) of Crest Energy Pakistan Limited (CEPL)
Generation Licence No. SPGL/14/2015 Licence Application No. LAG-294 Crest Energy Pakistan Limited (CEPL)
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