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ISLAMABAD: Pakistan has requested M/s Sinosure, Chinese insurance company, to support pending financial closure of certain energy projects, well informed sources told Business Recorder.

Prime Minister Shehbaz Sharif, sources said, had directed Ministry of Foreign Affairs (MoFA) to arrange an online session of working group with Sinosure to discuss and resolve bottlenecks with respect to financial closure of Azad Pattan hydropower project, Kohala hydropower project and Thar Block-I power projects. The government had decided that Power Division, Finance Division, Planning Division, Chinese Mission in Pakistan and Pakistan Mission in China along with other relevant stakeholders will participate in the session.

According to sources, on Wednesday, Pakistani team and M/s Sinosure team led by its Vice President, Xu Xinwei held detailed discussions on the issues in financial closure of a few projects as the Chinese insurance company is unwilling to extend any further assistance due to the treatment meted out to existing power projects despite GoP’s consistent efforts.

Pakistan’s Central Power Purchasing Agency –Guaranteed (CPPA-G) has sought Rs 100 billion from the government to establish a Revolving Account to ensure payments to CPEC IPPs and other IPPs. However, the proposal has not yet been approved by the Government.

Financial close, RCO of Thar coal project: Shanghai Electric seeks unconditional date extension

Sources further stated that during a meeting on October 21, 2022, of the Deputy Head of Mission in Beijing with Deputy Director General (Asia), Chen Song of the Chinese Ministry of Foreign Affairs vis-à-vis the forthcoming visit of the Prime Minister to China, the major projects under CPEC and issues related to power projects were discussed.

Referring to Prime Minister’s recent meeting with the Chinese Ambassador in which the Prime Minister had indicated his desire for some mega projects to be concluded/ announced during the upcoming visit, DDG Chen specifically identified ML-1, KCR and Gwadar Power Plant.

DDG Chen stated that while reviewing progress on these three particular projects, the Chinese side had identified some fundamental issues, which needed to be addressed in Pakistan. In this regard, he shared the following: (i) Gwadar Power Plant, which was originally planned to be established in Gwadar and which was supposed to run on imported coal had now been shifted to Thar area and was proposed to be run on Thar-coal. This had practically made it a new project requiring a fresh feasibility study; and (ii) default on the IPPs payments and delay in the establishment of revolving account was creating hurdles for the Chinese companies and financial institutions to finance any new mega projects in Pakistan. This remained a critical issue.

The sources maintained in most of the interactions with the Chinese side the issue of default in payment of IPPs is invariably mentioned as the key obstacle for approving financing of new mega projects by the Chinese financial institutions in Pakistan. The Chinese side argues that this default upsets their model of risk assessments and rate of return for the Chinese companies. Hence, they are pushing for the establishment of revolving account to ensure that this problem is not faced in future projects.

“We are aware that the Government has taken some positive steps in addressing these lingering issues. It would be important to complete internal processes for resolving the IPPs payment issue and setting up the revolving account preferably before the visit as this would help create a conducive environment for further movement on these projects,” the Chinese argue.

Copyright Business Recorder, 2022

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