Power projects: Chinese companies refuse request to review rate of return

ISLAMABAD: The Chinese government has reportedly rejected Pakistan’s request for review of Rate of Return (RoR) on power sector projects established under the China-Pakistan Economic Corridor (CPEC), well-informed sources told Business Recorder.

Pakistan had approached not only the Chinese government at the highest level but also Chinese companies individually, requesting them to sit with Power Division’s top brass for review of Power Purchase Agreements (PPAs) and RoR on the analogy of other Independent Power Producers (IPPs). However, answers from both levels were in the negative, the sources added.

Both the World Bank and the IMF have queried the government as to why Chinese companies were not approached when agreements with IPPs were being revised, along with a reduction in RoR. Power projects established under the CPEC include Port Qasim coal power project, Sahiwal coal power project, Engro Thar Coal Power & Mine Project, Hubco coal power project.

Special Assistant to Prime Minister on Power and Petroleum, Tabish Gauhar, testified before the Cabinet that power projects established under the CPEC are 25 per cent more expensive compared to prevailing international prices. He also made similar statements at different public fora which reportedly irritated the Chinese government, which conveyed its resentment at the highest level. Gauhar also took the lead and talked to former Chinese ambassador requesting him to convince Chinese companies to sit with officials on this issue, the sources said, adding that the Chinese ambassador refused to talk on this issue and advised the SAPM to directly talk with Chinese companies.

Power projects under CPEC: PD asked to resolve issues

At his remarks, National Accountability Bureau (NAB) issued an official statement that the statement of Tabish Gauhar “is not based on facts”.

The sources said, Chinese companies have also rejected the proposal of government of Pakistan saying that on one hand they are not being paid their claims of billions of rupees and on the other they are being asked for concession. Official said the Chinese argue that if they give any such concession to Pakistan, other countries where Chinese have established similar projects too, will demand concessions, which is not feasible for them.

“Chinese can give a concession in another project but are not ready to review PPAs of power projects already established,” sources added.

Sources further contended that the implementation on agreements with IPPs established under the 2002 policy is still unclear and NAB’s letter is “ambiguous”.

It was decided in the last meeting of Implementation Committee, which met recently to finalise strategy on NAB’s letter, to place the issue before the Minister for Law and Justice for a legal opinion.

Another meeting of Law Ministry and Power Division authorities was held last week, in which Law Division asked Power Division to send its specific questions in writing so that official comments may be dispatched.

Power sector: Chinese investors irked by non-payment of returns?

“As Power Division receives comments from Law Ministry, the case of IPPs of the 2002 Policy will again be submitted to the ECC,” the sources maintained. The government claimed that it has saved Rs 800 billion through renegotiation with IPPs which will reduce tariff by Paisa 37 per unit. The government also paid Rs 90 billion to the IPPs of the pre-1994 policy, the 1994 policy and some projects of wind, bagasse and solar.

Meanwhile, Minister for Energy, Hammad Azhar, in a tweet on August, 12 2021, claimed that on August 11, 2021, the country achieved record highest power generation and transmission of 24,467MW.

For reference, he said, in 2020, peak load registered was 23,370MW for one day and in 2018, it was just 20,811 MW. Average power demand and supply during these summer months is approximately 20 per cent more than last year.

Copyright Business Recorder, 2021