ISLAMABAD: China Export & Credit Insurance Corporation (Sinosure) has warned the GoP on not honouring its commitment of due payment to power generation plants established under the China-Pakistan Economic Corridor (CPEC).
A “displeasure” letter from M/s Sinosure has landed in Islamabad at a time when the caretaker Government is under pressure to renegotiate “expensive PPAs” signed with Chinese power projects.
A Senate Panel has sought details of investments made by Chinese companies in the power plants.
Sinosure reduces coverage for Pakistan’s projects to 70pc from 95pc
M/s Sinosure is state-owned policy insurance company which resolutely implements the decisions and plans of the state, and plays a positive role in supporting joint efforts to advance “the Belt and Road Initiative” (BRI).
According to a letter from M/s Sinosure: “Starting from 2013, the China-Pakistan Economic Corridor became the flagship project under the BRI, making Pakistan one of the most visible partners in the BRI. With the project smoothly progressing and trade booming, CPEC is now promoting comprehensive cooperation between the two countries and contributing to the betterment of the Pakistani people.
The most critical and reliable power plant in Pakistan, Port Qasim Power Plant, was inaugurated in 2017, marking the first batch of primary energy projects under CPEC to start generating electricity. Currently this Power Plant is capable of providing clean and cheap electricity to about 4 million Pakistani families, which significantly alleviates the issue of power shortages in Pakistan. It can not succeed without PPIB’s strong support and active participation in this project.
“As the insurer of Port Qasim Power Plant, we are highly concerned about the current operational status of the plant. Due to the foreign exchange constraints imposed by the State Bank of Pakistan (SBP) and delayed payments on electricity bills, the project currently owe large amount of funds to the coal supplier and faces business struggles,” said, Zhou Jin, Director Business Division One Strategic Client Department One Sinosure, in his letter to Managing Director PPIB.
M/s Sinosure requested the GoP that an agreement be reached between PPIB, CPPA-G and the project, to resolve the capacity payment difficulties. Furthermore, both entities support on electricity bills is crucial to the operation of the project, as well as, timely repayment of loans and insurance liability.
“Ensure the timely payment of electricity bills and the regular repayment of the debt service and the sustainable operating ability of the project,” said Zhou Jin.
In June 2023, CHIC Pak Power (Private) Company Limited (CPPCL) had revealed at a public hearing at NEPRA that M/s Sinosure has reduced its coverage for Pakistan’s projects to 70 per cent from 95 per cent and banks are now asking for 25 per cent coverage from third party.
In early months of current year, Port Qasim Electric Power (Pvt.) Co (PQEPC) had informed the government that both its units of 1320 MW are about to shut down due to the default of the government’s obligations. The coal supplier has stopped shipments after January 2023 due to outstanding foreign exchange requests with the State Bank of Pakistan (SBP). The shortage of coal has caused significant financial strain for the company, resulting in a shutdown of both units and capacity payment deductions.
Copyright Business Recorder, 2023