HomeNewsPower projects: Chinese again refuse to renegotiate PPAs

Power projects: Chinese again refuse to renegotiate PPAs

ISLAMABAD: Chinese power projects have, once again, refused to renegotiate Power Purchase Agreements (PPAs) with the Government of Pakistan, a longstanding wish of dollar-hungry Islamabad.

The government has to clear about Rs 350 billion of Chinese power projects dues which is why Chinese state-owned insurance company, Sinosure, is reluctant to extend insurance coverage to any new power project.

M/s Sinosure has also sent a “displeasure” letter to Islamabad after the strong rumour doing the rounds in Islamabad that the government is urging Chinese IPPs to renegotiate “expensive PPAs.”

CPEC power plants: Sinosure demands govt make payments

M/s Sinosure is a 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).

Last month, the Executive Committee of Special Investment Facilitation Council (SIFC), a facility established as a “single a facility to act as a single window” to facilitate investors, establish cooperation among all Government departments, and fast-track project development had directed Secretary Power Division to update and present recommendations on renegotiations of PPAs in the Executive Committee.

Power Division, sources said, has informally approached sponsors of Chinese power projects established under China Pakistan Economic Corridor (CPEC) framework, to renegotiate PPAs. However, GoP’s request has not been entrained.

“Chinese are not ready to renegotiate PPAs. As a matter of fact, now when we approach them for this purpose, they resent it,” the sources added.

Unconfirmed reports, however, suggest that a Committee is being constituted to deal with this issue.

According to sources, caretaker Prime Minister, Anwar-ul-Haq who is scheduled to visit China on 17-18 October, 2023 to attend the third BRI, has sought update status on payment to Chinese IPPs.

Prime Minister will draw attention of Chinese top brass to the exceptional rise in capacity payments because of near simultaneous arrival of new capacity from projects undertaken under CPEC, the sources added.

On October 10, 2023, Minister for Planning, Development and Special Initiatives held a meeting on CPEC energy projects in which the issues discussed included revolving account for CPEC IPPs, overdue payment for CPEC IPPs, Sinosure clearance for power projects, MoU on AMI, MoU on identification of potential sites for pump storage hydropower projects and MoU on development of renewable energy projects in Pakistan.

An insider told this scribe that the government is expected to make payment of Rs 8-12 billion to Chinese IPPs prior to visit of caretaker Prime Minister to China. The exact amount will be decided on arrival of Finance Ministry’s team from Morocco.

The sources said, during Imran Khan led government, Pakistan floated a proposal to Chinese government for renegotiation on contracts of power projects established under CPEC on the pattern of other IPPs or to purchase 1200-MW electricity from Pakistan for onward supply to Afghanistan.

According to initial estimates if the pacts with the CPEC IPPs are similarly re-negotiated, an initial working suggests that Pakistan can save $ 14.29 billion over the life of these projects which comes to an average of $0.48billion per year for average project life of 30 years.

Copyright Business Recorder, 2023

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