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Govt shuns plans to renegotiate $15b energy projects

ziaulislam

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Pak on Thursday committed with Beijing that it would not reopen $15 billion deals of energy projects under CPEC. With written assurance to China, the chapter opened by PM Khan on reducing power tariffs and withdrawing tax concessions seems closed now.

ISLAMABAD:
Islamabad on Thursday committed with Beijing that it would not reopen $15 billion deals of energy projects under the China-Pakistan Economic Corridor (CPEC), as both the nations also agreed on new areas of cooperation to deepen strategic economic relations.
With Pakistan’s written assurance to China, the chapter opened by the government of Prime Minister Imran Khan on reducing power tariffs and withdrawing tax concessions given to the Chinese energy projects seems closed now.
The consensus was reached during the 10th meeting of the Joint Cooperation Committee – the highest decision making body of the CPEC -- which finally met nearly after two years.
The meeting was held through videoconference and co-chaired by Asad Umar, Minister for Planning and Ning Jizhe, Vice Chairman of the National Development and Reform Commission (NDRC) of China.
The Pakistani side is committed to maintaining the tax and tariff policies stable and establishing a more standardised and facilitating power market in Pakistan, according to the decision of the JCC.


The tariff reduction negotiations with China have to be seen in the context of exceptionally cordial relations between both the countries, Umar said while addressing a press conference after the JCC meeting.
The PTI government in the past had announced plans to renegotiate the power tariffs and return on equity given to Chinese investors of the energy projects. It also wanted to seek a rollover of the $3 billion maturing Chinese repayments.
So far, 10 energy projects worth $10 billion have been completed and four projects costing $4.7 billion are under implementation. The government wanted to renegotiate terms of these schemes.
Pakistan also assured China to disburse $1.4 billion or Rs230 billion payables of the Chinese power plants on account of power generation cost that has been stuck up in the vicious circular debt cycle.
Pakistan had committed to open a revolving fund that would have deposits equal to 21% of the power generation cost. But the commitment was never honoured.
China on Thursday hoped that the Pakistani side would get the article related to the revolving account on the ground soon.
Umar said the ministries of finance and energy were working on a path to resolve the issues of overdue payments of the CPEC energy projects and the revolving fund.
The minister said about $1.4 billion or Rs230 billion were payable to the Chinese power plants and a solution would soon be found to it.
The JCC also approved the decision of inclusion of 700.7 MW Azad Pattan HPP and exclusion of RY Khan 1320 MW project from the CPEC framework.
Both sides agreed that the remaining 600MW Zonergy Projects at Quaid-i-Azam Solar Park will be implemented, in accordance with Pakistan’s generation planning, by means acceptable to both sides.
Pakistan and China also agreed to include new areas for cooperation under the CPEC framework.
Both the countries agreed to carry out a joint study for future development of Thar Coal blocks with a view to meeting Pakistan’s energy needs, conversion of coal into other products for domestic demand as well as exports.
China offered support for a plan for oil and gas sector development. For Thar Coal Gasification to Fertiliser Project, it was decided that the Pakistani side would prepare a policy framework to bring this technology to the country.

The Chinese side noted the progress on the North-South Gas Pipeline Project and offered support to carry out related actions under the framework of the development plan for the oil and gas sector of Pakistan.
For Strategic Underground Gas Storages, the government is planning to develop underground gas storages to ensure uninterrupted supply of natural gas.
The Pakistani side invited technically capable and financially sound Chinese companies in the exploration, development and production of metallic minerals.
Both sides agreed to continue cooperation in areas including Emerging Technologies Maritime sector, Mines and Minerals (Oil & Gas), Tourism.
Chinese concerns
Regarding Sukkur-Multan (M-5) project, the Chinese side expressed concerns about the deductions by the Employer unilaterally, the non-payment of remaining 50% of retention money and deductions from the works already completed and claims.
After detailed deliberations, both sides agreed that Employer’s and EPC Contractor’s issues shall be expeditiously resolved as per provisions of contract.
ML-I project
Both the countries agreed that financing negotiations of the Mainline-I project of the CPEC would focus on package-I, whose five sub-projects had been confirmed. The two sides agreed to make efforts to reach agreement on the terms of financing in a timely manner.
Discussion on ML-I is an ongoing process and issues like loan currency mix and interest rates remain unresolved, Umar said.
Both the sides agreed that the DI Khan-Zhob project was on high priority list and the loan request forwarded by the Pakistani side on the new format would be positively considered by China.
The JCC agreed to take the realignment of KKH from Thakot to Raikot Projects as one of the short-term projects instead of the Thakot-Raikot N-35 remaining portion and advance the realignment as a priority.
It was decided that the Pakistani side will process loan requests for Chitral-Shandoor-Gilgit (369km) project for consideration of the Chinese side. They decided to deliberate on Mirpur-Muzaffarabad-Mansehra (MMM) project after the approval of its PC-1.
It was agreed to discuss Peshawar-DI Khan Motorway and Dir-Chakdara Motorway after approval of their PC-1s by Pakistan.
Pakistan proposed to include Chitral Chakdara M-1 (Swat Motorway) as part of CPEC Western Corridor.
The Chinese side agreed to consider it after the submission of the project proposal. Both the sides agreed to implement 300MW Coal-fired Power Plant in Gwadar as soon as possible.

In order to encourage the substantial commencement of the project and put it into commercial operation at the earliest, Pakistan and China agreed to jointly create favourable conditions for project financing.
Considering the impact of the Covid-19 pandemic, the extension in financing closing date and the commercial operation date will be evaluated.
Security cooperation
Pakistan and China reaffirmed that a secure environment was vital to the development of CPEC. The two sides agreed that under a significantly evolved regional security environment, threats had complicated security challenges confronting CPEC.
Our learning from the Dasu attack is that Pakistan has to provide a kind of security to non-CPEC projects that is available to the CPEC scheme, said Umar.
Both the sides strongly condemned recent terrorist attacks targeting CPEC projects.
Pakistan and China signed an MOU for the establishment of a Joint Working Group (JWG) on information technology.
The most exciting development of the 10th JCC is the decision to set up an information technology joint working group, as IT is tomorrow’s economy, said Umar.
Letter of Exchange of Provision of Balochistan Solar Power Lighting Equipment and Provision of Medical Equipment and Material were also signed.
The JCC also announced the signing of MoU on Karachi Coastal Comprehensive Development Zone (KCCDZ) and Agreement of Cooperation Framework between Ningbo Port and Gwadar Port as well as Lease deed of Gwadar Expo Center.


On a lighter note everyone who follows finance news of Pakistan, On March 2021, PM Khan signed any agreement with IMF that we will increase eletrcitiy prices to 5.20 unit in 6 months ,however, when IMF dispatched 500 million dollar to Pakistan than PM Khan disgracefully fired Hafez Shiek, did not honor the agreement and hired Shaukat Tarin to deal with IMF with iron hands and it back fired so bad that Imran Khan does not even remember that Shuakat Tarin requires to become a senator before 17th October, than Shaukat tarin is going directly to IMF to apologize for their miscomments in October 15th.

This is the whole story PTI performance of 3.2 years.
Edit
Power companies refuse to renogoatiate deals signed in PMLN era citing lost money in kickbacks
Shukria pakistani awaam
They asked him to provide power at anycost in 3 yrs, also okaying kick backs(khata hey tu lagata be hey)
So why upset now
 

ziaulislam

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Then why same Awam is complaining about high electricity price now? 🤔
Thats what surprises me
In 2017-18 i consitently said on this forum that PPPP was better then PMLN and people laughed and cursed me.

Now they know why i said it
Atleast PPPP didnt sell our whole system out
Their focus was hydro and thar coal
Thar coal most credit goes to PPPP so do the funding for tarbela IV-V
 

ziaulislam

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PPP also secured the conversion of GENCO to coal via Asian bank
PMLN scrubbed that projected citing "excess power" in favour of CPEC
The jamsharoo plant (2000mw cheap power) was suppose to be converted in 2016 PMLN disbanded the project

The tarbela IV was suppose to be compeleted in 2017 delayed for over year with 50m thrown in the drain

Dasu delayed for 3+ years due to land conflcits not addressed

Bhasha dam delayed for 5 years while munda kept in legitation untill 2018

Yes we know there were raja rental issues but rental was temp thing not locked on agreemwnts
There are several other minor things that PPPP did but were backrolled in favour of MUCH expensive projects
 

hydrabadi_arab

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Chinese power plants are not expensive! Not sure why this myth keep getting repeated. Pretty much all coal power plants cost 7-8 cent per unit in $. Problem is previous govt had over valued $. Now in rupees Pakistani public will need to pay higher price. Capacity payments too isnt problem unique to Pakistan. Bangladesh is too facing huge increase in capacity payments.

Instead of crying over capacity payments and pissing off Chinese investors. PTI need to work on management of DISCOS where theft is rampant and recovery low. Find ways to use more power in winter. Govt have done this by reducing tariff in winter months.

These plants have given us time to build big dams. Otherwise it would have been stupid to wait for big dams to fix load shedding.
 

ziaulislam

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Chinese power plants are not expensive! Not sure why this myth keep getting repeated. Pretty much all coal power plants cost 7-8 cent per unit in $. Problem is previous govt had over valued $. Now in rupees Pakistani public will need to pay higher price. Capacity payments too isnt problem unique to Pakistan. Bangladesh is too facing huge increase in capacity payments.

Instead of crying over capacity payments and pissing off Chinese investors. PTI need to work on management of DISCOS where theft is rampant and recovery low. Find ways to use more power in winter. Govt have done this by reducing tariff in winter months.

These plants have given us time to build big dams. Otherwise it would have been stupid to wait for big dams to fix load shedding.
Coal is not at 8 cents where are you living
Hydro is not at 8cents

Chinese, qataris were offered 20 ROI leading to projects 30-50% more expensive then done via own loan/bond projects(RNLG Plants by PMLN era is cheaper)
Now thar was also given 20% ROI but thats indigenous fuel so okay

No doubt at 8 cents its still cheaper then our furnace and desel based oil plants(at 12 cents) but coal is coal
 

AsifIjaz

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PPP did only lip service for thar coal power plants. One just needs to look into how long it took for the Engro to get the things rolling for the project and what Qaim ali Shah used to say to Khalid mansoor (then working for engro group). I wish I could divulge details here.
I am not discrediting your point on pmln vs ppp but I disagree with thar coal as an example to your point. It is exactly opposite to tht.
Punjab bureaucracy was destroyed by pmln but in sindh ppp is the bureaucracy and the law. One just needs to look at any sector there.. be it education.. health.. police.. transport .. irrigation or dare I say judiciary.
 

HalfMoon

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Pak on Thursday committed with Beijing that it would not reopen $15 billion deals of energy projects under CPEC. With written assurance to China, the chapter opened by PM Khan on reducing power tariffs and withdrawing tax concessions seems closed now.

ISLAMABAD:
Islamabad on Thursday committed with Beijing that it would not reopen $15 billion deals of energy projects under the China-Pakistan Economic Corridor (CPEC), as both the nations also agreed on new areas of cooperation to deepen strategic economic relations.
With Pakistan’s written assurance to China, the chapter opened by the government of Prime Minister Imran Khan on reducing power tariffs and withdrawing tax concessions given to the Chinese energy projects seems closed now.
The consensus was reached during the 10th meeting of the Joint Cooperation Committee – the highest decision making body of the CPEC -- which finally met nearly after two years.
The meeting was held through videoconference and co-chaired by Asad Umar, Minister for Planning and Ning Jizhe, Vice Chairman of the National Development and Reform Commission (NDRC) of China.
The Pakistani side is committed to maintaining the tax and tariff policies stable and establishing a more standardised and facilitating power market in Pakistan, according to the decision of the JCC.


The tariff reduction negotiations with China have to be seen in the context of exceptionally cordial relations between both the countries, Umar said while addressing a press conference after the JCC meeting.
The PTI government in the past had announced plans to renegotiate the power tariffs and return on equity given to Chinese investors of the energy projects. It also wanted to seek a rollover of the $3 billion maturing Chinese repayments.
So far, 10 energy projects worth $10 billion have been completed and four projects costing $4.7 billion are under implementation. The government wanted to renegotiate terms of these schemes.
Pakistan also assured China to disburse $1.4 billion or Rs230 billion payables of the Chinese power plants on account of power generation cost that has been stuck up in the vicious circular debt cycle.
Pakistan had committed to open a revolving fund that would have deposits equal to 21% of the power generation cost. But the commitment was never honoured.
China on Thursday hoped that the Pakistani side would get the article related to the revolving account on the ground soon.
Umar said the ministries of finance and energy were working on a path to resolve the issues of overdue payments of the CPEC energy projects and the revolving fund.
The minister said about $1.4 billion or Rs230 billion were payable to the Chinese power plants and a solution would soon be found to it.
The JCC also approved the decision of inclusion of 700.7 MW Azad Pattan HPP and exclusion of RY Khan 1320 MW project from the CPEC framework.
Both sides agreed that the remaining 600MW Zonergy Projects at Quaid-i-Azam Solar Park will be implemented, in accordance with Pakistan’s generation planning, by means acceptable to both sides.
Pakistan and China also agreed to include new areas for cooperation under the CPEC framework.
Both the countries agreed to carry out a joint study for future development of Thar Coal blocks with a view to meeting Pakistan’s energy needs, conversion of coal into other products for domestic demand as well as exports.
China offered support for a plan for oil and gas sector development. For Thar Coal Gasification to Fertiliser Project, it was decided that the Pakistani side would prepare a policy framework to bring this technology to the country.

The Chinese side noted the progress on the North-South Gas Pipeline Project and offered support to carry out related actions under the framework of the development plan for the oil and gas sector of Pakistan.
For Strategic Underground Gas Storages, the government is planning to develop underground gas storages to ensure uninterrupted supply of natural gas.
The Pakistani side invited technically capable and financially sound Chinese companies in the exploration, development and production of metallic minerals.
Both sides agreed to continue cooperation in areas including Emerging Technologies Maritime sector, Mines and Minerals (Oil & Gas), Tourism.
Chinese concerns
Regarding Sukkur-Multan (M-5) project, the Chinese side expressed concerns about the deductions by the Employer unilaterally, the non-payment of remaining 50% of retention money and deductions from the works already completed and claims.
After detailed deliberations, both sides agreed that Employer’s and EPC Contractor’s issues shall be expeditiously resolved as per provisions of contract.
ML-I project
Both the countries agreed that financing negotiations of the Mainline-I project of the CPEC would focus on package-I, whose five sub-projects had been confirmed. The two sides agreed to make efforts to reach agreement on the terms of financing in a timely manner.
Discussion on ML-I is an ongoing process and issues like loan currency mix and interest rates remain unresolved, Umar said.
Both the sides agreed that the DI Khan-Zhob project was on high priority list and the loan request forwarded by the Pakistani side on the new format would be positively considered by China.
The JCC agreed to take the realignment of KKH from Thakot to Raikot Projects as one of the short-term projects instead of the Thakot-Raikot N-35 remaining portion and advance the realignment as a priority.
It was decided that the Pakistani side will process loan requests for Chitral-Shandoor-Gilgit (369km) project for consideration of the Chinese side. They decided to deliberate on Mirpur-Muzaffarabad-Mansehra (MMM) project after the approval of its PC-1.
It was agreed to discuss Peshawar-DI Khan Motorway and Dir-Chakdara Motorway after approval of their PC-1s by Pakistan.
Pakistan proposed to include Chitral Chakdara M-1 (Swat Motorway) as part of CPEC Western Corridor.
The Chinese side agreed to consider it after the submission of the project proposal. Both the sides agreed to implement 300MW Coal-fired Power Plant in Gwadar as soon as possible.

In order to encourage the substantial commencement of the project and put it into commercial operation at the earliest, Pakistan and China agreed to jointly create favourable conditions for project financing.
Considering the impact of the Covid-19 pandemic, the extension in financing closing date and the commercial operation date will be evaluated.
Security cooperation
Pakistan and China reaffirmed that a secure environment was vital to the development of CPEC. The two sides agreed that under a significantly evolved regional security environment, threats had complicated security challenges confronting CPEC.
Our learning from the Dasu attack is that Pakistan has to provide a kind of security to non-CPEC projects that is available to the CPEC scheme, said Umar.
Both the sides strongly condemned recent terrorist attacks targeting CPEC projects.
Pakistan and China signed an MOU for the establishment of a Joint Working Group (JWG) on information technology.
The most exciting development of the 10th JCC is the decision to set up an information technology joint working group, as IT is tomorrow’s economy, said Umar.
Letter of Exchange of Provision of Balochistan Solar Power Lighting Equipment and Provision of Medical Equipment and Material were also signed.
The JCC also announced the signing of MoU on Karachi Coastal Comprehensive Development Zone (KCCDZ) and Agreement of Cooperation Framework between Ningbo Port and Gwadar Port as well as Lease deed of Gwadar Expo Center.


On a lighter note everyone who follows finance news of Pakistan, On March 2021, PM Khan signed any agreement with IMF that we will increase eletrcitiy prices to 5.20 unit in 6 months ,however, when IMF dispatched 500 million dollar to Pakistan than PM Khan disgracefully fired Hafez Shiek, did not honor the agreement and hired Shaukat Tarin to deal with IMF with iron hands and it back fired so bad that Imran Khan does not even remember that Shuakat Tarin requires to become a senator before 17th October, than Shaukat tarin is going directly to IMF to apologize for their miscomments in October 15th.

This is the whole story PTI performance of 3.2 years.

China and Pakistan are strategic allies and China has always provided contracts favorable to Pakistan. People should not fall for the Indian propaganda to reopen and renegotiate contracts with China.
 

AsifIjaz

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Coming back to the topic..
If the news about Chinese straight forwards refusing to discuss a thing is true then i belive the best option available to us is to
1. change the power agreements to take and pay ...
2. Audit plants to ascertain them meeting minimum efficiency levels and
3. Lastly government should buy out the remaining workable life of the old and inefficient plants with a bitter pill once and then shut them down. They can get a small relief here as well.
4. Thar coal reserves should be converted to gas and tht gas should be offered for different industries. An example can be that mari gas based fertiliser plants be moved to these with round the year supply for making fertiliser provided they take grid electricity. I must admit that I have no idea whether the economics would work out here.
 

muhammadhafeezmalik

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What gibberish are you spewing now? The topic and the post is about the high guaranteed returns for the Chinese in form of capacity payments, similar to the expensive IPP agreements done by PPP, in which we have to pay them in $s whether we use it or not! And guess what pmln never bothered to even upgrade the transmission and distribution network so even if wanted to consume this expensive energy, then we still technically cannot. Although we do have orange train and metro bus which is just cost center for the govt.

But somehow this predicament has to do with Hafiz Shaikh and Tarin etc. You are extremely naive to think the crowd of PDF , which is made up of mainly college grads and expats working as professionals, will fall for silly nonsense like this. The fact of the matter is all debt and capacity payment agreements have been done by PPP and PMLN which are unsustainable now.
Why would a foreign company agree on rupee base rate of return as it has to pay debt amount in USD to another foreign bank??
 

ziaulislam

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Coming back to the topic..
If the news about Chinese straight forwards refusing to discuss a thing is true then i belive the best option available to us is to
1. change the power agreements to take and pay ...
2. Audit plants to ascertain them meeting minimum efficiency levels and
3. Lastly government should buy out the remaining workable life of the old and inefficient plants with a bitter pill once and then shut them down. They can get a small relief here as well.
4. Thar coal reserves should be converted to gas and tht gas should be offered for different industries. An example can be that mari gas based fertiliser plants be moved to these with round the year supply for making fertiliser provided they take grid electricity. I must admit that I have no idea whether the economics would work out here.
You mean govt renegades and gets stuck in courts

Pakistanis in general think running a country is a joke hence they elect jokers
 

AsifIjaz

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You mean govt renegades and gets stuck in courts

Pakistanis in general think running a country is a joke hence they elect jokers
Oh lord... please read my post again.
If point no 1 is what you are looking at then brother tht is exactly what is happening with all IPPs sans nishat chunian plant. Many contracts are being changed to take and pay from take or pay ealier.
However.. In case you still see a comment or suggestion around not returning the ROE/ROI or backing off from commitments then please revert.
 

Darth Vader

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Since Pakistan was blindly throwing money atleast they should have thrown that on renewable power sources.
Just Become of its location Pakistan can hugely benefit from solar, wind or hydro power sources easily.

Switching from coal and gas plants as you are facing one after another.

Making use of solar panels cheaper compared to putting higher taxes , Houses can generate enough power and even return some to grid which itself can be sold off or used inside Pakistan itself.

Supporting modern public transport Supported via EV killing multiple birds with 1 small stone.
 

airmarshal

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Reason for the major blunder?
On a lighter note everyone who follows finance news of Pakistan, On March 2021, PM Khan signed any agreement with IMF that we will increase eletrcitiy prices to 5.20 unit in 6 months ,however, when IMF dispatched 500 million dollar to Pakistan than PM Khan disgracefully fired Hafez Shiek, did not honor the agreement and hired Shaukat Tarin to deal with IMF with iron hands and it back fired so bad that Imran Khan does not even remember that Shuakat Tarin requires to become a senator before 17th October, than Shaukat tarin is going directly to IMF to apologize for their miscomments in October 15th.

If we have horned it that time we would been better now than 4 month before. Imran has no plan that is why no investor trust or want to invest in Pakistan until Imran Khan PM.

First time ever ADB, AIIB and WB has stopped lending to Pakistan on budget support, Annoyed China, IMF etc.


Honesty and speeches does not mean person is a good administration, intelligent, or smart.
Lets bring back Nawaz Sharif, Zardari or their kids then. Honestly, this nation being financially, morally and intellectually corrupt, it needs equally or more corrupt to rule it.

It does not matter how badly governed had been this hapless country in past 3 decades. The problem is Imran Khan.
 

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