ISLAMABAD: Prime Minister Shehbaz Sharif has directed Power Division to hold a meeting with SAPM on Power, Zafar-ud-Din Mahmood, on the issue of revolving account for CPEC IPPs, well informed sources in PMO told Business Recorder.
SAPM on Power, in a note to the Prime Minister, explained that it was agreed between the Power Division and National Energy Administration (NEA) of China that a “Revolving Account” will be established to meet any shortfall in payments to Chinese IPPs.
This was conveyed by NEA to all the Chinese lenders and it was made part of the loan Agreements signed between the Banks and sponsors of IPPs.
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According to SAPM, instead of “Revolving Account” a “Revolving Fund” was established some time ago, adding that due to insistence from the Chinese side and to comply with the relevant Clause of the agreement, approval for changing the name from “Revolving Fund” to “Revolving Account” was accorded by the Cabinet.
He maintained that NEA has not yet received an official intimation confirming the opening of Revolving Account. Only upon receipt of the formal official communication from Pakistan side, NEA will inform the lenders accordingly.
Zafar-ud-Din Mahmood in his note suggested that Power Division maybe asked to fulfil this requirement without any further delay. The sources said, while agreeing to the proposal of SAPM, Prime Minister has directed Power Division’s top brass to sit with SAPM and sort the issue out.
Chinese companies working on power projects, initiated under CPEC, are still facing financial woes despite Prime Minister’s repeated assurances.
Recently, Chinese government through Pakistan’s embassy in Beijing and its own embassy in Islamabad raised this issue at all forums. Chinese insurance company M/s Sinosure is unwilling to insure new financing for power sector projects due to failure to meet contractual obligations of companies that have already established projects.
Chinese Charge d’ Affairs to Pakistan, Pang Chaunxue, in a letter to Minister for Power KhurramDastgir Khan 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.
Official documents available with Business Recorder reveal that Sindh Engro Coal Mining Company (SECMC) 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.
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.
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.
Copyright Business Recorder, 2023