Investors showing reluctance: Power sector facing financing problems

ZAHEER ABBASI

ISLMABAD: Pakistan’s power sector is facing financing problems due to hesitation of investors and lenders towards the sector, owing to prevailing circular debt issue.

Sources said that this was revealed by the officials during a briefing to a parliamentary panel regarding hydropower projects in the private sector and challenges being faced. Sources quoted officials as saying that local banks have almost reached their exposure limit and foreign lenders are reluctant to lend money due to circular debt. 

The problem of land acquisition, inter-provincial issues for hydropower projects and law and order have also been responsible for slow-paced implementation of the projects. They further stated before the committee that provinces had no roadmap for the development and implementation of private power projects as there is non availability of expertise and lack of institutional capacity at provincial level. The slow processing by the regulators is also a factor for certain delays in implementation of IPPs.

The Senate Standing Committee was also given a  briefing on progress regarding Korat hydropower and other small projects currently under process. The meeting was informed that a meeting was held to discuss and finalize the review petition filed by sponsors in the light of proposed changes in the annual net energy production from 3401 GWh to 3249.78 GWh as per recommendations of PPIB and other issues concerning tariff for the project.

However, the sponsors of the project have clearly mentioned in a letter that Investment Committee of the Chinese sponsors will not accord its approval if tariff announced by National Electric Power Regulatory Authority (Nepra) is less than US cents 6.50/kWh. The sponsors have conveyed that in such a situation implementation of Karot hydropower project will be affected.

The authority, while considering national importance of Karot Hydropower project and the fact that early completion of this project is equally important in the current electricity situation of the country, has decided to further deliberate on some of the project specific issues with the project sponsors. The authority will announce its decision on review petition after the aforementioned discussion shortly.

The other small hydropower projects currently under process ie 1MW Blue Star Energy, 20MW Olympus Energy, 1.3 MW SAR Energy are at final stage and determination of tariff by the authority will be done within the stipulated time under the Nepra Tariff (Standards and Procedure) Rules 1998.