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ISLAMABAD: Chinese company, Three Gorges South Asia Investment Ltd (CTGI) has offered the government to set up 830 MW solar power plant in Muzaffargarh in phases at indicative tariff of US Cents 4.63 per unit which will be reduced to Cents 4.39 per unit after sometime.

The company has made this offer in a letter to Secretary to the Prime Minister, Dr Syed Tauqeer Shah, copies of which have also been sent to other concerned ministers.

A meeting between the Prime Minister and the Chairman of the China Three Gorges International Corporation (CTGI), Wu Shengliang was held on July 7, 2022, in which the latter desired that CTGI submit a proposal for the development of a Solar PV power project, in Punjab. The CTGI expressed its willingness to invest in developing an approximately 830 MW Solar PV power project in Pakistan and submit a proposal accordingly.

According to the company, following are the details of the work undertaken so far by CTGI in the preparation of a viable proposal: (i) during July 2022, through strong support of the Ministry of Energy, the Chinese technical team visited potential sites of PV power plants around Multan area on July 24, 2022; (ii) from August 1, 2022, the company’s technical team began comprehensive work with the technical parameters comprehensively designed and compared, and the technical solution of the optimal technical parameters on around August 20 2022; (iii) at the same time, company’s business and finance team and a number of photovoltaic projects that have been put into production in Pakistan conducted research and negotiated with a number of banks and insurance institutions in the United Kingdom, China and Pakistan on the feasibility of project financing.

After a comprehensive discussion of financing costs, the quotations received around August 25, 2022 were evaluated; (iv) the company finally selected the plot of land in Muzaffargarh, and according to the power grid situation and surrounding geological conditions, the company intends to implement an approx. 830 MW (DC side; 640 MW AC side) Solar PV power project developed in four phases, 207 MW (DC side; 160 MW AC side) during each phase; (v) due to Pakistan’s long-term arrears in electricity bills, the banks and insurance institutions are not very active in the market. Besides, a very high interest rate is being quoted by local banks in Pakistan due to which the company chose to pursue 100 percent US dollar based financing, under a project financing framework.

At present LIBOR is 3.5 percent and the interest rate more than 7.5 percent which pushes up the energy tariff; (vi) taking advantage of the large number of domestic and international procurement of photovoltaic panels by the Three Gorges Group, the firm has conducted multiple rounds of inquiries and communication with many photovoltaic module factories in China, and finally determined the EPC price, and now the EPC price is also at a high level.

The company maintains that based on the prevailing reasons for the first phase of the 207MW installed capacity Solar PV Power Project, the current calculated indicative electricity tariff being proposed is US cent 4.63/kwh. The company maintains that the first phase includes a backup transformer and other facilities, which will not be required again during the subsequent phases and is therefore, a one-time development cost. In subsequent phases, the electricity tariff will reduce to approximately US cent 4.39/kwh.

The company has claimed that the price of photovoltaic modules will decrease in the future, therefore it is prudent to implement the project in a phased manner to benefit from future price reduction opportunities. The subsequent phases of the project will be discussed further in line with the prevalent international prices, after one year.

The company has also claimed that China Three Gorges Group, the world's largest clean energy Group, is committed to providing clean and inexpensive electric power to the people of Pakistan. The Three Gorges Group’s electricity tariff calculation for the proposal Approx.830MW (DC side, 640 MW AC side) installed capacity Solar PV power project in Muzaffargarh is based on a sincere, realistic and scientific effort made in order to propose a bankable project and constitutes a serious offer, adding that due to the rising cost of equipment and international debt financing, the offer reflects the best possible proposal for the successful implementation of this project.

The company has sought time from Prime Minister so that it could brief him on its proposal and seek his guidance for further development of the Solar PV power project.

Copyright Business Recorder, 2022

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