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CPEC power projects: China concerned over payment issues

  • Chinese government through Pakistan’s embassy in Beijing and its own embassy in Islamabad has raised this issue at all forums
Published March 6, 2023
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ISLAMABAD: Chinese companies working on power projects, initiated under China Pakistan Economic Corridor (CPEC), are still facing financial woes despite Prime Minister’s repeated assurances, well informed sources told Business Recorder.

The Chinese government through Pakistan’s embassy in Beijing and its own embassy in Islamabad has raised this issue at all forums. Chinese insurance company M/s Sinosure is also unwilling to insure new financing for power sector projects due to failure to meet contractual obligations of companies that have already established projects.

Official documents available with Business Recorder reveal that Sindh Engro Coal Mining Company (SECMC) has informed Power Division that due to significant delays in the opening of Letter of Credit (L/Cs) and foreign remittance, its mining operations are severely impacted.

CPEC IPPs: Govt willing to amend PERA to satisfy Chinese lenders

SECMC is also incurring demurrage charges, liquidated damages and penalties due to delay in approvals, which are also resulting in damage of reputation, as well as, additional cost. SECMC is continuously engaged with banks but significant amount is still pending.

“Our O&M contractor has now communicated that due to significant delay in their payment they are unable to continue mine operations. We request your immediate intervention to support remittance of payment to our Chinese O&M contractor; otherwise, mine operations will stop with immediate effect,” said Amir Iqbal, CEO SECMC in his letter to Secretary Power.

Shutting down the operations of the mine will lead to shut-down of the four power plants operating on Thar coal namely, Engro Power Thar Limited (EPTL 660 MW), Thar Energy Limited (300 MW), Thal Nova Power Thar(Pvt.) Limited (330 MW) and Lucky Electric Power Co(660 MW). Equivalent power capacities operated on imported coal will result in additional forex burden of $ 85 million per month on the economy and will also result in three times more expensive power generation, he added.

Meanwhile, Port Qasim Electric Power (Pvt.) Co (PQEPC) has informed the government that both its units of 1320 MW are about to shut down as a direct result of the default of GoP’s obligations.

According to the power company, currently due to outstanding foreign exchange requests with the State Bank of Pakistan (SBP), the coal supplier discontinued shipments after January 2023. The shortage of coal has cause significant financial strain for the company as the coal inventory has been fully depleted, causing a shut down of both units resulting in capacity payments deductions.

Chinese Charge d’ Affairs to Pakistan, Pang Chaunxue, in a letter to Minister for Power Khurram Dastgir Khan has shared the concerns of Chinese companies that have established power projects under CPEC initiative.

According to Pang Chaunxue, CPEC coal-fired power plants now face difficulty in buying coal due to foreign exchange restrictions including Port Qasim Power Plant which has shut down as its coal has run out. Meanwhile, the capacity payments deduction is still pending resolution which means the company could not get electricity payment, or the capacity payment, and is facing a very difficult situation.

The company has Embassy’s help to coordinate with the competent forum to solve difficulties, he said, hoping that the Minister for Power could play a leading and coordinating role and introduce measures to solve the capacity payment deduction issue, etc.

“This year marks the 10th anniversary of CPEC. I believe that under your guidance (Power Minister), these issues can be solved in a proper way. We will jointly promote the high-quality development of CPEC and serve Pakistan to improve its economy and export competiveness,” said Pang Chunxue.

Islamabad has shown willingness to amend/ modify Pakistan Energy Revolving Account (PERA) to sort out concerns of Chinese lenders of CPEC IPPs with respect to payment in future.

The sources said, in addition to CPEC projects, other IPPs, public sector power generation plants, Pakistan State Oil (PSO), SNGPL and SSGCL, PPL, etc., also are facing serious financial constraints due to non-payment by CPPA-G due to which circular debt is now over Rs 2.6 trillion.

Copyright Business Recorder, 2023


Comments are closed.

Leo Mar 06, 2023 08:23am
looking forward the MoE could resolve this issue ASAP, wish the country could be out of stuck in short time.
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Dr.Salaria, Aamir Ahmed Mar 06, 2023 10:24am
Very upsetting behavior from Iron Brother, who's relations with us are sweeter than honey, deeper than ocean and higher than himalayas. We should also revisit our silence on the Xinjiang (aka East Turkestan) genocide, and cease cooperation in CPEC which is a catastrophe, unless China extends more loans and insurance cover.
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Rana Altaf Mar 06, 2023 01:22pm
@Dr.Salaria, Aamir Ahmed, You Statement is unlogical. The Thar coal power plants are indigenous coal. If mining equipment not reached it will increase our import of coal. Which means more foreign exchange loss. Hence these thar coal project issues must be settled on priority basis. Actually your statement is an encouragement of import Mafia. You want to ruin the country and Pakistan relationship with China. The actual problems are imported coal base projects. There is commission Mafia in Pakistan who received kick backs by ruining these imported coal substitute local coal projects Rana amir Fact Sheet
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Muhammed Mar 06, 2023 02:39pm
Accountant finance minister has made the mess further messier.
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Khurram Mar 06, 2023 07:03pm
This government of crooks need to go. No one is willing to deal with them.
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TimeToMovveOn Mar 07, 2023 07:08am
CPEC is like the many promises made to the Pakistan public without deliverance. While some power projects succeeded and other will succeed, the overall scope has failed, and the said for economic revitalization of Pakistan is unlikely. The Chinese really gave a golden opportunity to Pakistan, but they did not realize what a bunch of looters and idiots the Pakistan politicians were (across all the political spectrum). Now they just want to cash in their money and go on. Other than making statements here and there China has pulled back from investing in any new projects. Why would they not. Would any sane pakistani invest in CPEC. Do you see Pakistani businessmen rushing to Gwadar to invest their hard earned money. No. If their own countrymen do not trust CPEC why will outer countires, come and invest there.
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Tulukan Pundamavane Mar 07, 2023 09:36am
@Dr.Salaria, Aamir Ahmed, I agree. Sweet honey and extortion for payment cannot flow together. The Uighur, Taiwan and US Ally cards should strategically be played by Pakistan to squeeze juice out of the Chinese, like how we did to USA during War on Terror.
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