National Electric Power Regulatory Authority

Islamic Republic of Pakistan

NEPRA Tower, Attaturk Avenue (East), G-511, Islamabad

Ph: +92-51-9206500, Fax: +92-51-2600026
Web: www.nepra.org.pk, E-mail: registrarnepra.org.pk

No. NEPRA/RISA(Tariff)/TRF-478/TWPL-20 19/18834-18836

July 23, 2020

Subject: Decision of the Authority in the matter of Tariff Modification Petition filed by
Tricom Wind Power (Private) Ltd. for its 50 MW Wind Power Project [Case No.
NEPRAITRF-47 8/T WPL-20 191

Dear Sir,

Please find enclosed herewith the subject decision of the Authority (07 Pages) in Case No.
NEPRA/TRF-478/TWPL-20 19.

2. The Decision is being intimated to the Federal Government for the purpose of notification
in the official gazette pursuant to Section 31(7) of the Regulation of Generation, Transmission and
Distribution of Electric Power Act, 1997.

3. The Order part of the Authority's Decision is to be notified in the official Gazette.

Enclosure: As above

2 61'O
(Syed Safeer Hussain)
Secretary
Ministry of Energy (Power Division)
'A' Block, Pak Secretariat
Islamabad

CC:

1. Secretary, Cabinet Division, Cabinet Secretariat, Islamabad.

2. Secretary, Ministry of Finance, 'Q' Block, Pak Secretariat, Islamabad.
 National Electric Power Regulatory Authority
Islamic Republic of Pakistan
NEPRA Tower, Attaturk Avenue (East), G-511, Islamabad
Ph: +92-51-9206500, Fax: +92-51-2600026
Web: www.nepra.org.pk, E-mail: registrarnepra.org.pk
Registrar

No. NEPRA/R/SA(Tariff)/TRF-478/TWPL-20 19/18837 July 23, 2020

Chief Executive Officer,

Tricom Wind Power (Pvt.) Ltd.
7-A, Tabba Street,
Muhammad Au Society,
Karachi- 75350
Tel: 021-35205479-80

Subject: Decision of the Authority in the matter of Tariff Modification Petition filed by
Tricom Wind Power (Private) Ltd. for its 50 MW Wind Power Project [Case No.
NEPRAITRF-478/TWPL-20 19J

The Authority has made its Decision on the subject matter. The Decision has been sent to
Ministry of Energy (Power Division) for notification in the official Gazette vide letter No.
NEPRA/RISA(Tariff)/TRF-478/TWPL-2019/18834-18836 dated 23.07.2020. A copy of the
Decision is served herewith.

Enclosure: As above

(Syed Safeer Hussain)

 National Electric Power Regulatory Authority
Islamic Republic of Pakistan
NEPRA Tower, Attaturk Avenue (East), G-511, Islamabad
Ph: +92-51 -9206500, Fax: +92-51 -2600026
Web: www.nepra.org.pk, E-mail: registrarnepra.org.pk

No. NEPRA/R/SA(Tariff)/TRF-47 8/T WPL-20 19/18838 July 23, 2020

Chief Executive Officer

Central Power Purchasing Agency Guarantee Limited (CPPA-G)
Shaheen Plam, 73-West, Fazl-e-Haq Road,
Islamabad

Subject: Decision of the Authority in the matter of Tariff Modification Petition filed by
Tricom Wind Power (Private) Ltd. for its 50 MW Wind Power Project FCase No.
NEPRA/TRF-478/TWPL-20 19J

The Authority has made its Decision on the subject matter. The Decision has been sent to
Ministry of Energy (Power Division) for notification in the official Gazette vide letter No.
NEPRAIRJSA(Tariff)/TRF-478/TWPL-20 19/18834-18836 dated 23.07.2020. A copy of the
Decision is served herewith.

Enclosure: As above
o1 2P
(Syed Safeer Hussain)
 I L)l II I t\LIII ILIIII II II I II I..JI I'I Lu ILI III IVIL.)L.1IIIL_.L.IIIL.)I I F '.IIII'...'I IIILJ L_)y

fricom Wind Power (Private) Limited for its 50 MW Wind Power Project

DECISION OF THE AUTHORITYIN THE MAilER OF TARIFF MODIFICATION PETITION FILED BY TRICOM WIND POWER

(PRIVATE) LIMITED FOR ITS 50 MW WIND POWER PROJECT

Backqround

TRICOM Wind Power (Private) Limited (hereinafter referred to as 'TWPPL", the Project Company or the
Petitioner') is formed to establish a 50 MW wind power project (the "Project"( to be located in Jhimpir, Sindh.
National Electric Power Regulatory Authority ('NEPRA" or the Authority") awarded Generation License to
TWPPL dated August 08, 2018. On November 19, 2018, the Authority vide its determination approved a
levelized tariff of Rs.5.7833/kWh (US Cents 4.7824/kWh( for TWPPL (Tariff Determination") under NEPRA (Tariff
Standards & procedure) Rules, 1998.

2. While determining the aforesaid tariff, the Authority noted that the State Bank of Pakistan (SBP") had issued
Refinancing Scheme for Renewable Energy in June, 2016 ('SBP Scheme 201 6") Under the said Scheme, SBP
was offering concessionary debt at 6% interest (fixed rate comprising of 2% share of SBP and 4% share of
relevant commercial banks( for renewable energy projects having capacity of up to 50 MW. The amount of
loan to be provided to any eligible project under that Scheme was fixed up to the limit of Rs.6 billion for the
debt servicing tenor of ten years. Since the Project was eligible to avail the referred financing (having fixed
concessionary rate), so the Authority computed and approved the aforesaid tariff of TWPPL based on the
terms of SBP Scheme 2016 and directed the petitioner to secure financing under the said Scheme. The
provision of tariff adjustment on commercial local/foreign loan was also given in the Tariff Determination,
subject to non-availability of the partial/whole financing under SB[ Scheme 2016. The exchange rate of
Rs. I 20/US[) was used in the Tariff Determination.

Tariff Modflcation Petition

3. The petitioner vide letter dated September 18, 2019, filed the subject Tariff Modification Petition (hereinafter
referred to as "Modification Petition"). The said Modification was filed by the petitioner under Regulation of
Generation, Transmission and Distribution of Electric Power Act, 1997 (NEPRA Act") and the rules and
regulations made thereunder, including Rule 3 of Tariff Rules. In the instant Modification Petition, the petitioner
has requested the Authority to modify the Tariff Determination due to the following two reasons/grounds:

a) debt financing mix and repayment terms

b) reference exchange rate

4. Making changes on account of the above grounds, the petitioner requested a levelized tariff of Rs.7.6206/kWh
(US Cents 4.7629/kWh) and prayed that the Authority may modify its tariff and debt servicing schedules
accordingly.

Ad
 Tricom Wind Power (Private) Limited for its 50 MW Wind Power Project

Proceedings

5. The Authority considered the aforesaid Modification Petition and admitted the same to deliberate upon its
grounds/merits. Hearing in the matter was scheduled to be held on January 8, 2020. A notice regarding
hearing was published in the newspapers with nationwide circulation on December 27, 2019. Subsequently,
individual notices were also sent to the petitioners and stakeholders, considered relevant in this case, on
January 02, 2020.The hearing was held as per schedule on January 8, 2020 at NEPRA Tower which was
attended by the representatives of the petitioner, Central Power Purchasing Agency Guarantee Limited
(CPPAGL") and others.

6. In response to the notice of hearing, CPPAGL vide letter dated January 7, 2020, provided its consolidated
comments in respect of Modification Petitions filed 12 wind power projects, including of TWPPL, which are
reproduced hereunder:

It is submitted that, in the due process of subject tariff modification in resect of 12 wind power plants, the
Authority should also review/revisit other pertinent oarameters, inter-alia, declining trends of project costs;
timelines, etc. in view of the prevailing market conditions which has direct impact on the tariff of the 12 wind
power projects in order to strike a balance between the consumers and the investors, as envisaged in the
Tariff (Standard and Procedures) Rules 1998."

7. The comments of CPPAGL were forwarded to the petitioner on May 28, 2020 for its response there on. The
petitioner vide letter dated June 3, 2020, submitted its response. Following is the summary of the submissions
put forth by the petitioner during the proceedings of Tariff Modification as well as the response it submitted on
the comments of CPPAGL.

Debt Financing Mix & Repayment Terms: TWPPL submitted that the Authority in Tariff Determination
computed tariff on the basis of 100% financing under SBP Scheme 2016 while recognizing circumstances
where the company might not be able to secure whole of the required financing under that Scheme. For
such situations where 100% SBP financing was not available, a provision of adjustment of the tariff at the
time of Commercial Operations Date ("COD") on commercial local or foreign debt with spreads of 2.25%
over KIBOR and 4.25% over LIBOR respectively was also approved. The petitioner submitted that SBP
Scheme 2016 could be availed for whole of the debt requirement of renewable energy projects
achieving Financial Close (FC") on or before June 30, 2019, However, SBP Scheme 2016 expired in June,
2019 and the same has been renewed/extended, with some changes, by SBP on July 26, 2019 ('SBP
Scheme 2019"). According to the petitioner, SBP Scheme 2019 provides for financing of up to 50% of their
debts requirement to eligible renewable energy projects. In addition, TWPPL has submitted a letter of its
lender namely Bank AL Habib dated August 22, 2019stating that financing of only up to 50% of the debt
portion of the Project can be secured under SBP Scheme 2019. As a result, thereof, the petitioner
submitted that it has arranged the remaining debt from International Finance Corporation (IFC") in

2
 Tricom Wind Power (Private) Limited for its 50 MW Wind Power Project

foreign currency. The Term Sheet dated September 11, 2019 of the same was provided by TWPPL along
with the Modification Petition. According to said Term Sheet as provided by the petitioner, the debt
repayment period of the foreign loan portion shall be 13 years after the COD and shall be repaid on a
quarterly basis while the applicable spread over LIBOR shall be 4.25%. The petitioner submitted that as the
remaining portion of loan is being financed in foreign currency so IFC has requested TWPPL to seek
adjustment of the Tariff Determination so that the approved tariff should reflect the components of both
financing (i.e., local and foreign) separately with their applicable repayment terms (10 years for financing
under SBP Scheme and 13 years for foreign financing). TWPPL also highlighted that representative of lFC
met the Authority on April 04, 2019 for this purpose and submitted its formal request to the Authority vide
letter dated April 25, 2019. Stating above, the petitioner requested to revise its Tariff Determination to
reflect the financing 50:50 mix of foreign financing and SBP financing being availed by TWPPL.

Reference Exchange Rate: The petitioner submitted that the Tariff Determination is based on an exchange
rate of Rs. 120/USD, however, the prevailing exchange rate has reached to Rs. 160/USD and PKR is
expected to fall further by the time the Project will achieve COD. The petitioner stated that due to (a) the
unprecedented devaluation of the PKR, (b) the competitive tariff awarded to the Project, (c) the high
debt to equity ratio, and (d) payment delays from the power purchaser, the company will face extreme
hardship in payment of its USD financing obligations immediately upon achievement of COD, until the
tariff trued up decision is issued by the Authority, which as per the precedent is expected to lake
considerable time. The petitioner also submitted that its foreign lender has also requested for this
adjustment. Stating above, the petitioner has requested to modify the Tariff Determination based on most
recent exchange rate.

iii. SBP Debt Repayment Structure: Subsequent to the hearing, the petitioner vide letter dated May 04, 2020,
submitted that it has been requested by its local lenders that SBP, while approving the financing under SBP
Scheme 2019, the repayment profile under annuity style repayment was not approved by the SBP
instead, SBP has directed that the repayment of facilities under SBP RE Scheme 2019 shall be based on
fixed principal repayment installments. In view thereof, TWPPL requested to revise local debt payment
schedule in respect of SBP financing on equal principal installment basis. The petitioner also requested to
treat the said request as an addendum of subject Modification Petition.

iv. Response on CPPAGL Comments: The petitioner submitted that pursuant to Tariff Determination, it has
successfully achieved FC on November 18, 2019. It stated that Tariff Determination was based on certain
assumptions which were allowed adjustment/revision on prevailing circumstances and the Modification
Petition has been filed to get those adjustments. It also submitted that CPPAGL has not raised any specific
objections or comments in respect of the grounds of the Modification Petition. TWPPL also submitted that
the comments of CPPAGL are utterly unsubstantiated and without merits and not a single ground or basis
has been provided by CPPAGL to support of its comments, hence, the company is not aware what case it
has to answer and the basis thereof. Furthermore, the petitioner submitted that unsubstantiated

ER / 3

§
iui O1TY
 LJL.I,lL)I L)I I I P',U II 11.1111 y ii ii I ILl II LII LIII IVILILIlI IL.LII ILIl I F II II¼JI I III'L4 LI)'

Tricom Wind Power (Private) Limited for its 50 MW Wind Power Project

comments of CPPAGL are contrary to the well-settled principles of due process, non-prejudice, equity,
fairness, level playing field, vested rights, promissory estoppel and non-discriminatory treatment. Based on
these submissions, the petitioner prayed that the comments of CPPAGL may kindly be rejected being
irrelevant to the subject petition and ignoring the fact that the company has already achieved FC based
on the tariff allowed by the Authority.

Analysis and Decision of the Authority

3. The Authority has considered the submissions put forth by the petitioner. It was noted that the Authority in the
Tariff Determination allowed the provision for the adjustment of tariff on commercial local/foreign financing, or
a mix of both, subject to submission of the proof (issued by either SBP or commercial bank) providing that the
petitioner first exhausted the option of availing 100% financing under SBP Scheme. For this purpose, the
petitioner during the proceedings of the Modification Petition informed about SBP Scheme 2019 that allows up
to 50% debt financing for eligible renewable energy projects of more than 20 MW. Further, the petitioner also
submitted a letter dated August 22, 2019 from Bank AL Habib which provide that under SBP financing the
maximum amount available to be arranged is copped at PKR equivalent to 50% of the debt amount. The
Authority considered both of these filings and is of the view that the petitioner has fulfilled the documentary
requirements as stated in the Tariff Determination for the adjustment/revision of its tariff on a mix of foreign and
local loan under SBP Scheme. The Authority also noted that the Term Sheet dated September 11, 2019 as
provided in respect of foreign loan includes the conditions (financing cost, repayment period etc.) which are
in line with the Tariff Determination. Nevertheless, the Authority noted that Tariff Deterrnination states the
provision of requested adjustment at the time of COD of the Project and the petitioner has not achieved that
milestone. The requirement of its foreign lenders has been stated as the reason by the Petitioner to seek this
adjustment before the FC. The Authority deliberated in detail on these submissions, however, decided to
maintain its earlier decision that the required adjustment sholl be made in the tariff at the time of COD of the
Project.

9. With respect to adjustment of tariff on current/prevailing exchange rate, the Authority noted that it is
cognizant of the fact that since the issuance of Tariff Determination, the Pakistan Rupee has devalued
significantly. However, the Authority noted that there is a mechanism already prescribed/available in the Tarift'
Determination to address variations in the exchange rate which provide for such adjustment at the time of
COD. The argument the petitioner has taken for this ground is that tariff adjustment decision by NEPRA at the
time of COD typically takes a few months which, inter alia, may pose hardship for the company to service ifs
foreign debt obligations. The Authority considered these submissions of the petitioner and is of the view that
presumption of the petitioner of delay in COD adjustment, based on certain precedents, by NEPRA cannot
form the basis of this adjustment before the stated time. Hence, the Authority decided that the required
adjustment shall be made in the tariff at the time of COD of the Project as given in the Tariff Determination.

4
 L.iI II I I
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Tricom Wind Power (Private) Limited for its 50 MW Wind Power Project

10. The Authority has also considered the request of the Petitioner regarding the repayment structure (equal
principal instead of equal annuity) of the financing under SBP Scheme. In this regard, the Authority has noted
that if has been approving tariffs on both equal annuity as well on equal principal structures. Therefore, the
Authority has decided to approve the provision of equal principal based debt repayment structure for
financing under SBP Scheme. The same shall be incorporated in the tariff at the time of the COD based on the
documentary evidence to be submitted by the company.

The Authority deliberated in detail on the comments advanced by CPPAGL and the response thereon
submitted by the project company. The Authority agrees with the petitioner that under the Modification
Petition it has actually asked for certain adjustment that were allowed in the Tariff Determination. However,
CPPAGL has commented for the redetermination of tariff. The Authority considers that Tariff Determination was
approved based on certain technology and with the timeline of achieving FC. The petitioner has not made
any changes in the approved technology and has achieved FC in the given timeline. Therefore, it does not
warrant any revision in tariff merely because the allowed adjustments have been sought by the petitioner
before the stated time.

Revision of O&M Cost

12. The Authority noted that during the proceedings of the Tariff Determination, the petitioner submitted O&M
Contract for the initial 2 years of operations amounting to USD 39,000 per MW per annum. The Authority
carried out due diligence and approved annual O&M cost of USD 23,000 per MW per year. This approved cost
was equally divided in local and foreign portions.

13. It is noted that NEPRA on September 06, 2018 sent a letter to a number of the power generation companies
stating, inter alia, that the Authority has decided in principle for all the power generation projects which have
not achieved COD that their sponsors shall be required to conduct a transparent and competitive bidding
process for the claim of the O&M cost.

14. The Authority also noted that the tariff determination of one wind power project namely Master Green Energy
Limited ('MGEL") was issued in August, 2018. In the case of MGEL, the Authority approved the O&M cost as
USD 23,000 per MW per year and also decided the following:

"The petitioner is hereby directed to conduct a transparent and competitive bidding orocess for the selection
of the O&M contractor while following the procedure given in the EPC Guidelines, 2017. The O&M cos
approved in this determination shall be considered as ceiling for that purpose. Approved O&M cost shall be
adjusted on the basis of bidding results at the time of COD considering the apDroved amount as the
maximum limit."
 1 .IIIy II II II I._lI IE il I'IIII I FlIIII..Il I IIII.) I.)y

Tricom Wind Power (Private) Limited for its 50 MW Wind Power Project

15. However, MGEL filed the review motion on aforesaid determination requesting, inter alia, to remove the
condition of competitive bidding for the selection of the O&M Contractor. The decision regarding the review
motion was issued by NEPRA in February, 2019 while deciding the following:

The Authority noted that it put the condition for O&M bidding in the tariff determinations of three wind power
prolects including MGEL issued on August 20, 2018. That condition was introduced to bring the best possible
results for this particular component. A number of project companies opposed that condition while statinq
that lenders require getting O&M done through Original Equipment Manufacturer (OEM') during the debt
servicing period. Also, they submitted that the existing stage of wind industry in Pakistan is not at the stage
where independent operators can take on the O&M of wind power plants to the satisfaction of the financiers.
The Authority deliberated in detail about the submissions with respect to level of wind industry in Pakistan.
Further, the Authority analyzed the approved benchmark level of O&M and found that the said cost is quite
competitive and fairly similar to the cost being allowed in the comparable places. In view thereof, the
requirement of bidding for O&M contractor was removed in the later twelve wind tariff determinations issued
on November 19, 2018. Accordingly, the Authority has decided to take out this condition of bidding for O&M
contractor introduced in the impugned determination. However, it is to be noted the Authority may consider
revising the approved O&M cost after the completion of debt servicing period. For that purpose, the Authority
may require the project company to carry out competitive bidding while considering the approved cost as
ceiling."

16. As stated above, the Authority firstly required MGEL to carry out the process of competitive bidding for the
selection of the O&M Contractor for the allowance of the O&M cost. However, later the Authority did not
include this requirement in the tariff determinations of twelve wind power projects, including the petitioner,
issued on November 19, 2018 and also removed that condition for MGEL in its review decision issued in
February, 2019. As given above, the said condition was taken out while considering that the O&M cost
approved is quite competitive and comparable as well as in view of the existing relatively less mature stage of
wind industry in Pakistan. The requirement of lenders of getting O&M done through OEM during the debt
servicing period was also given due consideration for the removal of this condition.

17. The Authority noted that back in 2013, it approved the O&M cost of more than around USD 45,000 per MW per
year for wind power plants. Afterward, gradual reductions were made in that cost component and USD 23,000
per MW per year was approved in 2018, i.e. around 50% of the O&M expenses approved in 2013. This
reduction was made in light of the decreasing O&M cost trends that occurred across the world primarily due
to the increase in competition in this industry. The Authority noted that this decrease may continue in the
future as well, therefore, it may not be considered appropriate and justified to let the approved O&M cost
remain fixed for the whole tariff term. Besides, the Authority also understands that approved O&M cost, linked
with prescribed indexation, may result in excessive savings, on top of the approved return, and therefore
cannot be left unchecked for the whole control period of 25 years. In view thereof, it has been decided that
the amount of O&M cost, its mix, and the corresponding mechanism thereof as approved in the Tariff

6
 L)ISI0F 01 I11 /-\U iiioiiiy iii ne fliOT T([ 01 oniir IVTOUIFICOTIOfl reiuion IIICO 0'/
Tricom Wind Power (Private) Limited for its 50 MW Wind Power Project

Determination shall be applicable for the first two years of operations. Afterward, the Authority may consider
making revisions in the O&M cost, while capping the allowed prevailing level, anytime during the tariff control
period. Those revisions may also entail changing the mix of the approved O&M cost (local and foreign) as well
as the indexation mechanism (indices, frequency etc.). For that purpose, the Authority may also direct/require
the petitioner to carry out the competitive bidding to select the contractor [or the provision of the O&M cost.

Order

18. The Authority has decided that the revision/adjustments of tariff on account of debt mix, repayments terms
and exchange rate as requested by the petitioner in the subject Modification Petition shall be made at the
time of COD of the Project. Further, the Authority has decided to modify the Tariff Determination to add
therein the following condition:

'After two years of operations, the Authority may consider making revisions in the O&M cost, while capping
the allowed prevailing O&M cost level, anytime during the tariff control period. Those revisions may also entail
changing the mix of the approved O&M cost (local and foreign) as well as the indexation mechanism
)indices, frequency etc.). For that purpose, the Authority may direct the petitioner to carry out the competitive
bidding to select the contractor for the provision of the O&M cost."

19. The Order part is recommended for notification by the Federal Government in the official gazette in
accordance with Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power
Act, 1997.

AUTHORITY

(Rafique Ahmad Shqik )Eng. Bahadur Shah)

Member \ Member

(Self U •h iattha)
Vice Chairman /5' 7' 2.-c2.

(Tausef H.
Chairm