ISLAMABAD: The financial closure of 1,320 MW Shanghai Thar Coal Block-1 is reportedly in trouble as Industrial and Commercial Bank of China (ICBC) has decided to withdraw $ 300 million financing, well-informed sources in Ministry of Planning, Development and Special Initiatives (PD&SI) told Business Recorder.
The newly-established plant was on forced outages in May 2023 due to technical faults in its coal mines which has alerted officials sitting in Islamabad.
In March this year, Prime Minister Shehbaz Sharif inaugurated 1,320 megawatt Shanghai Electric power plant.
Thar coal-based power plant: COD achieved
The power regulator has also shared its concerns on issues being faced by the newly established generation plant operating on local coal. NEPRA is to hold its own inquiry on the reasons for the forced outage of the power plant.
According to CPPA-G, substantial amount of mud in coal has created faults in coal mines and the company is trying to rectify the fault.
The sources said Meng Donghai, Chief Executive Officer (CEO) of Thar Coal Block-1 Power Generation Company (subsidiary of Shanghai Electric Group Company) called on ambassador of Pakistan in Beijing and raised different issues facing the Company
According to Donghai, Thar Block-l was first mega project of Shanghai Electric in Pakistan. The use of local coal by the project was significantly contributing in lowering energy prices through not requiring foreign exchange for coal purchase from abroad.
Although the project had started, the financial closure was pending as SINOSURE was seeking due approval from Chinese government; and Industrial and Commercial Bank of China (ICBC) has decided to withdraw $ 300 million financing of project as one of the financers.
The sources said, Shanghai Electric has serious concerns that in case of non-availability of any other financier, its application of financial close might not be approved.
Since the start of project, Power Division (CPPA-G) was paying only 50-75 per cent monthly invoice of the company, as compared to claim of Power Division of paying 85% to all CPEC IPPs which has resulted in Rs 13billion outstanding tariff payment.
An application is pending with Thar Coal Energy Board (TCEB) since September 2022, for fixation of coal tariff for special purpose vehicle company, established by their Power Generation Company to supply coal to the project.
The Power Generation Company recently submitted a petition to NEPRA for Thar Coal Block 1 for one-time adjustment of tariff from Rs 8.3 to Rs 21 per kilowatt hour for the first 10 years from the date of commercial operation.
The petition was submitted in view of Nepra’s decision taken on the submission of the company for unconditional approval of upfront tariff for Thar Coal projects. The power plant will be operating in loss until the petition is approved by Nepra as without the approval of the submitted petition paying salaries, purchasing coal and repaying loans will not be possible.
Copyright Business Recorder, 2023