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F Feasibi Ility St Tage Ta Ariff Pr Roposa Al MAHL POWER C OMPANY LIMITED Feasibility Stage Tariff Proposal 640 MW Capacity Mahl HyH dropower Prooject SPONSORS: China Three Gorges South Asia Investments Limited February 2018 1 Page FEASIBILITY STAGE TARIFF PROPOSAL MAHL POWER C OMPANY LIMITED List of Abbreviations: ACE Associated Consultancy Engineer BOQs Bill of Quantities COD Commercial Operations Date CPP Capacity Purchase Price CPPA Central Power Purchasing Agency (Guarantee) Limited CSAIL China South Asia Investments Limited CTGHG China Three Gorges Hong Kong Investment Company Ltd. CTG China Three Gorges Corporation CTGI China Three Gorges International Corporation EPC Engineering, Procurement & Construction Contract EPP Energy Purchase Price GOAJK Government of Azad State of Jammu and Kashmir GOP Government of Pakistan GW Gigawatt GWh Gigawatt hours HPP Hydro Power Project Hrs. Hours IA Implementation Agreement IDC Interest During Construction (Capitalized) IFC International Finance Corporation IPR NEPRA (Import of Electric Power) Regulations, 2017 IRR Internal Rate of Return KW Kilowatt (kWh: Kilowatt hours) kWh Kilowatt hours m meter(s) MPCL Mahl Power Company (Pvt) Limited MW Megawatt (MWh: Megawatt hours) MWh Megawatt hours NEPRA National Electric Power Regulatory Authority No. Number PKR Pakistan Rupee POE Panel of Experts PPA Power Purchase Agreement PPIB Private Power Infrastructure Board ROE Return on Equity SIDRI Shanghai Investigation, Design & Research Institute, Co. Ltd. SRF Silk Road Fund US¢ United States cent USD United States Dollar WHT Withholding Tax 2 Page FEASIBILITY STAGE TARIFF PROPOSAL MAHL POWER C OMPANY LIMITED Table of Contents 1. DETAILS OF THE APPLICANT ........................................................................................ 6 2. EXECUTIVE SUMMARY .................................................................................................. 7 3. BASIS FOR TARIFF PROPOSAL .................................................................................... 11 4. PROJECT BACKGROUND ............................................................................................. 12 5. PROJECT BENEFITS TO PAKISTAN AND AJK ............................................................ 14 6. ABOUT THE APPLICANT &PROJECT SPONSORS ....................................................... 15 6.1 The Applicant ................................................................................................15 6.2 The ProjectSponsors ......................................................................................15 6.2.1 Ownership Structure .......................................................................................15 6.2.2 China Three Gorges South Asia Investment Limited (“CSAIL”) ...................16 6.2.3 Trans Tech Pakistan ........................................................................................16 6.3 China Three Gorges Corporation (“CTG”) ...............................................16 6.4 International Finance Corporation (IFC) ...................................................16 6.5 Silk Road Fund – owned by Government of China (“SRF”) ..................17 7. PROJECT DESCRIPTION ............................................................................................... 18 7.1 Project Location .............................................................................................18 7.2 Project Components ......................................................................................19 7.3 Hydrology and Sedimentation....................................................................20 7.4 Annual Generation .......................................................................................21 7.5 Seismic Hazard Analysis .............................................................................22 7.6 Geological and Geotechnical Studies .........................................................23 7.7 Optimization and Project Sizing .................................................................25 7.8 Power Plant and Auxiliaries ........................................................................26 7.9 Construction Timelines ................................................................................27 7.10 Grid Interconnection ....................................................................................28 7.11 Environmental & Social Impact Assessment ............................................29 8. PROJECT COST ............................................................................................................. 30 8.1 Project Cost Summary ..................................................................................30 8.2 Project Cost Details .......................................................................................30 8.2.1 EPC Cost ..........................................................................................................30 3 8.2.2 Engineering and Supervision ..........................................................................33 Page FEASIBILITY STAGE TARIFF PROPOSAL MAHL POWER C OMPANY LIMITED 8.2.3 Project Development Cost ...............................................................................34 8.2.4 Land Acquisition & Resettlement & Environment Protection .......................34 8.2.5 Custom Duties, taxes & Other Levies .............................................................35 8.2.6 Insurance during Construction .......................................................................36 8.2.7 Law Services / Legal Fee & Charges ................................................................36 8.2.8 Sinosure ...........................................................................................................36 8.2.9 Financial Charges ............................................................................................37 8.2.10 Interest during Construction ...........................................................................37 9. FINANCING PLAN ........................................................................................................ 38 9.1 Debt Financing ..............................................................................................38 9.2 Equity Funding ..............................................................................................38 9.3 ROE, ROEDC and Equity Redemption ......................................................39 10. TARIFF & DEBT SCHEDULE......................................................................................... 40 10.1 Operations Costs ...........................................................................................40 10.2 Return on Equity & Return on Equity during construction ...................42 10.3 Withholding Tax on Dividend ....................................................................42 10.4 Sinosure ..........................................................................................................42 10.5 Debt Financing ..............................................................................................42 10.6 Reference Tariff Table ...................................................................................43 10.7 Reference Debt Service Schedule ................................................................44 11. INDEXATIONS, ESCALATIONS & COST ADJUSTMENTS ........................................... 45 11.1 Adjustments due to variation in Project Cost Components ...................45 11.2 Indexations & Escalation of Tariff Components ......................................49 12. PASS THROUGH ITEMS ................................................................................................ 50 13. GENERAL ASSUMPTIONS ............................................................................................ 52 ANNEX – A - LETTER OF INTEREST ...................................................................................... 54 ANNEX – B – UPDATED FEASIBILITY STUDY ...................................................................... 55 ANNEX – C- PPIB APPROVAL OF FEASIBILITY STUDY ...................................................... 56 ANNEX – D – SUMMARY OF ITEM-WISE BILL OF QUANTITIES (BOQS) .......................... 57 * * * * * 4 Page FEASIBILITY STAGE TARIFF PROPOSAL MAHL POWER C OMPANY LIMITED List of Tables Table 1: Project Information ..................................................................................................................................................... 8 Table 2: Chronology till Feasibility approval ................................................................................................................. 13 Table 3: Summarized Project Cost ...................................................................................................................................... 30 Table 4: Summarized EPC ..................................................................................................................................................... 31 Table 5: Civil Works (Including Preparatory Works) ................................................................................................ 31 Table 6: Electrical & Mechanical (Incl. Transportation & Erection) ................................................................... 33 Table 7: Contingency................................................................................................................................................................ 33 Table 8: Land and resettlement cost ..................................................................................................................................
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