Govt turns down Saudi offer to acquire two power plants
ISLAMABAD: Pakistan has turned down Saudi Arabia’s offer to acquire two LNG-fired power plants only under a sovereign deal, as laws do not allow selling assets without following a rigorous competitive process.
“Saudi Arabia also demanded Pakistan to provide free land, complete security and utility facilities for setting up an oil refinery of over 100,000 barrel per day capacity at Gwadar,” the sources told The Express Tribune on Monday.
But a final decision on whether to set up the refinery will be taken by Saudi Arabia after visiting the site today (Tuesday).
As compared to the Pakistani side, the Saudi delegation was fully prepared for a hard bargain, according to officials who attended the negotiations.
During the first day of talks, Saudi Arabia showed interest in acquisition of 2,446 megawatts Haveli Bahadur Shah and Baloki power plants, which are located in Punjab and owned by the federal government, according to sources in the Ministry of Energy.
The Gulf country wanted to clinch a deal under a government-to-government arrangement, they added.
“Our legal framework did not allow selling existing assets without following the competitive bidding process, well-defined under the Privatisation Ordinance,” the officials said.
“The government will only take the legal path and that is competitive bidding in case of the already completed projects,” said a senior government functionary on condition of anonymity.
Both the power plants had been set up during the last tenure of the PML-N at an investment of Rs191 billion.
However, they said a government-to-government deal with Saudi Arabia was possible in case of Greenfield projects.
A Saudi delegation led by Ahmed Hamed Al-Ghamdi, Adviser to the Saudi Minister for Energy, is in the town on a five-day visit to Pakistan to find out new investment opportunities.
The delegation held technical-level talks on Monday to review the possibility for investment in Reko Diq gold and copper mines, setting up an oil refinery in Gwadar and investing in the power sector.
The officials said the Saudi delegation wanted to clinch an early deal and buying the power plants through competitive process would consume at least six months.
The Power Division secretary explained the mechanism for selling the assets to the Saudi authorities.
The Saudi authorities were of the view that the General Electric technology that used to set up power plants may soon become obsolete as the GE was shifting its investment towards renewable energy projects.
“In order to satisfy the Saudi delegation, the government has sought a legal opinion from the Ministry of Law whether the existing plants can be sold under a government-to-government deal,” the sources said.
“However, there is still a possibility to sign a memorandum of understanding on cooperation in the energy field but its wording is expected to be vague,” the sources said.
But the federal government has to take the federal cabinet’s nod before signing the MoU with Saudi Arabia.
The sources added that discussions also took place on the issue of getting oil on deferred payments. But no major headway was made during the first day, as Pakistani authorities lacked specific information. More deliberations on getting oil on deferred payments would take place in next two days.
“Saudi Arabia has sought details about Pakistan’s total oil requirements and existing agreements on crude oil imports with other countries,” the sources said.
An official handout issued by the Board of Investment (BOI) on the visit stated that Abdul Razak Dawood, Adviser to the Prime Minister on Commerce, informed the visiting delegation about the liberal invest regime of the country and available opportunities for the kingdom.
The Saudi delegation comprised of high-level officials of various government departments as well as representatives of Saudi Aramco, Maaden and ACWA power.
“The adviser told the delegation on the huge potential of investment, lying unrealised in areas of power generation, transmission and distribution,” stated the BOI.
He informed the delegation in detail on the projected increase in the power consumption keeping in view the economic growth, especially after operationalisation of CPEC.
The representative of ACWA in the Saudi delegation offered their institutional capacity, especially in the power generation areas, and offered to engage with Pakistan in long term projects aimed at ensuring the economic and sustained power supplies, according to the BOI.
He added that they were interested in the areas of renewable energy and establishing water desalination plants.
Head of the Saudi delegation showed his intentions to finalise the framework for flow of investment to Pakistan from Saudi Arabia in mega projects, according to the BOI.
