Failure to achieve financial close: Two key CPEC hydropower projects excluded from IGCEP

ISLAMABAD: The government has excluded two major China-Pakistan Economic Corridor (CPEC) hydropower projects — totalling 1,824 MW and valuing $4 billion — from the Indicative Generation Capacity Expansion Plan (IGCEP) 2025–35, citing failure to achieve financial closure.

“We have excluded the 1,124 MW Kohala Hydropower Project and the 700.7 MW Azad Pattan Hydropower Project from the IGCEP till 2034, along with other private sector projects,” revealed Federal Minister for Power, Sardar Awais Khan Leghari, while briefing the Senate Standing Committee on Power, chaired by Senator Mohsin Aziz.

The committee witnessed heated debate on non-inclusion of the 207 MW Madyan and 88 MW GabralKalam hydropower projects. Brig Tariq Saddozai (Retd), Special Assistant to the Chief Minister of Khyber Pakhtunkhwa (KPK) on Energy and Power, argued that both projects were included in the previous IGCEP as committed projects.

He stated that despite meeting the criteria set by the Council of Common Interests (CCI) in 2021—and being protected under the National Electricity Plan 2023–27—the projects were removed from the latest IGCEP. He added that the provincial government had already invested Rs 14 billion in land and infrastructure for the projects.

Saddozai claimed the federal government had “moved the goalposts,” resulting in the exclusion of KPK’s projects from the IGCEP 2025–35.MinisterLeghari and the Power Secretary maintained that both World Bank-funded projects had not signed binding contracts and did not qualify under the least-cost project criteria. They clarified that the IGCEP must be approved by the National Electric Power Regulatory Authority (NEPRA) following a public hearing, during which all affected projects can present their cases.

CPEC hydropower project achieves hoisting of last rotor in Mansehra

While the Power Division rejected KPK’s arguments, it agreed to hold further discussions with the provincial government.

During the discussion on the interim Net Hydel Profit (NHP) arrangement, Rehmat Akhtar, CEO of the Central Power Purchasing Agency–Guaranteed (CPPA-G), confirmed a payment of Rs 1.10/kWh to KPK, with a 5% annual indexation. He said CPPA-G is currently making payments to WAPDA for onward distribution to both KPK and Punjab.

He also noted that the Rs 1.10/kWh rate, including 5% annual indexation from 2016, is being recovered from consumers. Outstanding payments of Rs 40 billion under NHP have already been accepted. Once the determinations for FY2023–24 and FY2024–25 are finalized, the NHP rate will increase to Rs 1.70/kWh.

The KPK government claimed its outstanding dues total Rs 76 billion, while WAPDA maintained the amount is Rs 63 billion.

The Committee Chairman recommended increasing NHP monthly payments to Rs 5 billion, up from the current Rs 3–4 billion, and proposed that payments be routed through CPPA-G instead of WAPDA.

It was decided that an internal meeting at the Ministry level would be convened to finalize the proposed NHP payment mechanism.

On the issue of wheeling charges (Use of System Charges – UoSC), the Power Minister informed the committee that the Cabinet Committee on Energy (CCoE) has approved wheeling charges at Rs 12.55/kWh, excluding stranded costs—one of the major factors behind previous higher rates. The Cabinet ratified the decision.

Initially, an allocated capacity of 800 MW will be made available for competitive bidding. The highest bidder will be granted access to wheel electricity.

The committee lauded the Power Minister and his team for addressing the wheeling charges issue and for achieving a Rs 190 billion reduction in losses incurred by the power distribution companies (Discos).

Meanwhile, according to a press release issued by the Senate Secretariat, Federal Minister for Power Awais Ahmad Leghari clarified that KP authorities did not fully present the CCI-approved power policy, and citing a single clause without context was misleading. He added that if these projects were included, electricity prices could rise by Rs6 per unit by 2034. The Power Division, he said, had removed 8,000 to 10,000 MW worth of projects from the plan — including several CPEC power projects — to protect the public from expensive electricity.

The minister further informed the committee that the government had terminated agreements with five IPPs and renegotiated others, resulting in an estimated saving of Rs3.4 trillion over the next four to five years. This year alone, distribution company (DISCO) losses were reduced by Rs191 billion.

He acknowledged the persistent problem of electricity theft but noted that the target for establishing a competitive market had been achieved, freeing the government from mandatory power purchases.

The committee also deliberated on captive power plants, costly imported coal and LNG projects, and the tariff structure for the protected category. The chairman committee called for a review of the protected category policy. Secretary Power Division confirmed that a reassessment is underway and that consumers using up to 200 units are receiving subsidies. The chairman urged the federal minister to introduce multiple slab rates to protect the consumers from a sudden high jump in tariff.

Senator Mohsin Aziz urged both the federal and provincial governments to revisit the matter so that these KP projects could be completed, benefiting both the province and the country.

Copyright Business Recorder, 2025