CPEC-IPPs contracts: Pakistan seeks renegotiation with China

[ghazi52]

CPEC-IPPs contracts: Pakistan seeks renegotiation with China​

Mushtaq Ghumman
03 Feb, 2022

ISLAMABAD: Pakistan is set to float proposals 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, well informed sources in CPEC Authority told Business Recorder.

These proposals will be presented to Chinese top leadership during the visit of Prime Minister Imran Khan to China commencing from Thursday (today).

Special Assistant to Prime Minister on CPEC, Khalid Mansoor has finalised all the proposals with respect to issues of CPEC projects, their resolution mechanism and future cooperation in different sectors.

According to CEPC Authority, over-dues/ receivables of CPEC IPPs are now Rs 200 billion, and IPPs may default because of rising prices of coal in the international market. IPPs may also suspend the operations of power plants as per suspension clauses of the signed Power Purchase Agreements (PPAs).

“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.

Prime Minister Imran Khan has been informed that 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.

According to sources, when initial inquiries were made with the Chinese officials to explore the possibility of seeking a similar support from CPEC-IPPs, it was indicated that doing so would not be in line with the spirit of CPEC as it would seriously affect the sanctity of contracts signed under CPEC framework agreement.

The sources maintained that it was further said that the Chinese government would not view favourably the underlying fact that such a demand may be coming at the behest of the IFIs and other western lenders.

An alternate option to offset the cost i.e. $ 0.47 billion per year can be to sell power to China for further provision of electricity to Afghanistan, the sources said, adding that Pakistan can offer China to consider provision of electricity to Afghanistan through Pakistan for 30 years as part of their development assistance to Afghanistan. China through a contract may buy power from Pakistan and provide it to Afghanistan either at cost or at reduced rates as per its political terms.

Pakistan can allocate power from its power pool to China, the sources said, adding that China can also offer to lay transmission line connecting Pakistan grid to the nearest point in Afghanistan and invest in their grid.

The power balance of Pakistan till 2030 shows that Pakistan has a surplus power of at least 3,970 MW, which will increase over time.

Pakistan will supply power on its power purchase basket price on the basis of energy transfer rate and capacity transfer rate already in place for transfer pricing of power generation cost to the Discos and KE which is currently Rs 12/ Unit approximately.

The sources said through sale of 1200MW to China, Pakistan will earn approx Rs 100 billion ($0.57 billion) per year from the year of supply of power and for 30 years the savings will be to the tune of Rs 3,000 billion at current prices.

Meanwhile, sources in Commerce Ministry told Business Recorder that Prime Minister will also seek support from Chinese leadership to increase exports by $3 billion per annum. Commerce Ministry has shared its talking points with the Prime Minister, who is also Minister Incharge Commerce. Pakistan will request China to enhance the rice quota.

Copyright Business Recorder, 2022

 

[GumNaam]

the IPP contracts are not through the Chinese government but directly with the Chinese companies themselves. having said that, since these ARE Chinese companies, the Chinese government can muscle its way in and make the companies re-negotiate the contracts.

 

[ARMalik]

The corruption has no bound in Pakistan. Why they cannot use the local coal from Thar if the international coal prices are high?? There is 5-Billion metric ton of high quality coal from Thar sitting next door, and these corrupt arse holes still want to buy expensive coal from overseas.

 

[GumNaam]

The corruption has no bound in Pakistan. Why they cannot use the local coal from Thar if the international coal prices are high?? There is 5-Billion metric ton of high quality coal from Thar sitting next door, and these corrupt arse holes still want to buy expensive coal from overseas.

coal doesn't give kick backs.

 

[Flight of falcon]

The corruption has no bound in Pakistan. Why they cannot use the local coal from Thar if the international coal prices are high?? There is 5-Billion metric ton of high quality coal from Thar sitting next door, and these corrupt arse holes still want to buy expensive coal from overseas.

You can't just use any coal. Plants machinery is very coal type specific. It impossible to use local coal without major upgrades.

 

[ARMalik]

You can't just use any coal. Plants machinery is very coal type specific. It impossible to use local coal without major upgrades.

The new deposits at Thar are extremely High quality coal. Are you saying the Plant machinery intakes bad quality coal??

By the way, Thermal plants are established so that they can intake a variety of coal types. They have a bandwidth.

 

[Flight of falcon]

The new deposits at Thar are extremely High quality coal. Are you saying the Plant machinery intakes bad quality coal??

By the way, Thermal plants are established so that they can intake a variety of coal types. They have a bandwidth.

No it’s a very poor
Quality coal. Trust me
I know not suitable for power generation unless special technology is used to remove sulfur first…

 

[FuturePAF]

Considering the increased demand for electricity, extending the transmission lines to China itself should be discussed. With all the dams being built, unless there is a plan to absorb the excess electricity being generated, the surplus will become a large albatross around the neck of the nation.

This is why the second phase of CPEC needs to be implemented ASAP, agricultural modernization and industrial projects in the SEZs

No it’s a very poor
Quality coal. Trust me
I know not suitable for power generation unless special technology is used to remove sulfur first…

Could it be used efficiently to make diesel? I know it’s not preferable to make petrochemicals this way, but it would cut down on importing oil/gas

 

[hydrabadi_arab]

So China will buy power from Pakistan for Afghanistan? Why?

 

[JackTheRipper]

So China will buy power from Pakistan for Afghanistan? Why?

Because our politicians wants costly electricity in Pakistan by imposing more taxes, will claim no electricity in Pakistan.

 

[ghazi52]

,..,
Federal govt restores seven CPEC powerplants’ tax exemption

The federal government has restored the tax exemption for the seven power plants currently being developed under the China-Pakistan-Economic-Corridor (CPEC) project, news sources reported on June 7. The formal announcement of the tax exemption will be made in the budget announcement scheduled for June 10.

Reportedly, the following powerplants have been exempted from tax duties on the import of heavy machinery:

• Kohala Hydro Company (Private) Limited – with a generation capacity of 1,124 MW (date of IA execution: May 25, 2020)
• Azad Pattan (Private) Limited – with a generation capacity of 700.7 MW (date of IA execution July 6, 2020
• SK Hydro (Private) Limited – with a generation capacity of 870.25 MW (date of IA execution: April 11, 2014).
• CHIC Pak Power Company (Pvt) Limited – with a generation capacity of 300 MW (date of execution: April 8, 2021).
• Thal Nova Power Thar (Private) Limited – with a generation capacity of 330 MW (date of IA execution November 24, 2017)
• Thar Energy Limited – with a generation capacity of 330 MW (date of IA execution November 10, 2017)
• Thar Coal Block-1 Power Generation Company (Private) Limited – with a generation capacity of 1,320 MW (date of IA execution: December 12, 2019.

However, the government has instructed companies to meet the following criteria in order to avail the tax exemption status:

• The company shall enter into an Implementation Agreement (IA) with GOP
• The contractor shall submit a copy of the contract or agreement under which he intends to import the goods for the project.
• The chief executive or head of the contracting company shall certify that the imported goods are the project’s bona fide requirement.