Pakistan, China revise ‘priority list’ of CPEC energy projects

ISLAMABAD: Pakistan and China have signed a revised priority list of energy projects they plan to complete in the next two years under the multibillion-dollar corridor programme, making adjustments in light of progress made on these schemes during the last couple of years.

The Energy Expert Group agreed to upgrade another 660-megawatt (MW) Hubco coal-fired power plant to the prioritised list but downgraded the 1,320MW Rahim Yar Khan Power project to its actively promoted list, which carries projects that will be completed in the next five years. The parties also upgraded the Oracle Power project to the priority list.

The Energy Expert Group signed the list in light of an understanding reached during a Special Meeting for China-Pakistan Energy Projects held in Beijing in December. Prime Minister’s Secretary Fawad Hasan Fawad, Secretary Water and Power Younus Dagha had attended the meeting from Pakistani side.

Now, the list will be placed before the Joint Working Group for endorsement. After that, it will go to Joint Cooperation Committee (JCC) – the highest decision making body on CPEC issues.

The Chinese Energy Expert Group was in town for the last two weeks to finalise the revised list, said the officials.

In November 2014, when Pakistan and China singed the Energy Framework Agreement, the priority-list projects had 10,040MW generation capacities while the actively promoted list generation capacity comprised of 6,645MW projects.

Priority list

The priority projects are the ones that both sides are keen to complete by 2018, although only about half of the planned generation of 8,810MW projects will be available by 2018. The reasons for their delays were inter-ministerial disputes and inclusion of financially unviable projects at the initial stage of CPEC.

Power projects having a cumulative capacity of about 5,000MW under CPEC would be operational by 2017 and 2018, Planning, Development and Reform Minister Ahsan Iqbal said last month.

The actively promoted projects are those that were planned to be made operational by 2022.

The availability of power from the CPEC energy projects is very crucial for the government to fulfil its promise to end power outages by the end of this year. However, the government has signed highly Chinese-favoured energy deals in its endeavour to end load shedding. It has offered up to 34.5% return on equity to the sponsors of coal-fired power plants-which is unprecedented.

Actively promoted projects

Both sides have agreed to downgrade 1,320MW Rahim Yar Khan coal-fired power plant to actively promoted projects from priority projects, said the officials of Ministry of Water and Power. The Rahim Yar Khan project was not financially viable as there was no transmission line at the project site.

Both sides also agreed to upgrade the 1320MW Oracle local coal power plants to the priory list. At one stage, the Ministry of Water and Power had warned the Oracle Company to expedite its work or else it will be deleted from the CPEC framework.

The 1,320MW Hubco power plant is now added to the priority list. The project is being built in collaboration with China Power Hub and would get 27.2% return on equity. The total project cost is $1.92 billion and the sponsors would obtain $1.44 billion loan at 6% interest rate.

Hubco was facing problems in execution of the project and it took six months to get an environment impact assessment clearance certificate from Balochistan government, said Omer Rasul, Additional Secretary Water and Power.

This happened only after the sponsors of 1320MW Hubco power plant agreed to give 3% of their share to the provincial government, said Rasul early this week.

However, the official documents showed that this arrangement would not affect the majority shareholding of Chinese partners. The Chinese sponsors share will not be less than 51%. It is expected that Prime Minister Nawaz Sharif will perform the groundbreaking ceremony of this project within a couple of months.

The government has also extended Letter of Support (LoS) to the Hubco project for five more months to June this year. The project has not yet achieved the financial close but the groundwork has started with equity money.

The first 660MW plant of Hubco power will become operational by December next year while the second plant is expected to be ready by August 2019, according to Ministry of Water and Power officials.

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