Pakistan in danger of falling into China’s “debt trap”

[volatile]

The majority — $35 billion — of CPEC investments is for power plants. The agreements for what Pakistan will pay for each plant are surprisingly transparent and are posted on the website for the National Electric Power Regulatory Authority. The CPEC website lists projects, costs and progress.

The energy projects are treated as investments by Chinese companies, but they are actually loans plus fixed returns to equity. Once constructed, Pakistan will buy what the plants produce at the 8.50 rupee rate. The rate pays back the loan that the Chinese company took from a Chinese bank to build the plant; a commercial 5 percent interest rate; a one-time payment equal to 7 percent of the cost of the project as insurance against default (even though Pakistan has offered sovereign guarantees); and a 15 to 20 percent return on equity. The rate of return is high but standard across similar projects that fall under the country’s policy for independent power producers.

What Pakistan owes for the next 30 years will be calculated in dollars frozen at the 2013 exchange rate of 97.10 rupees to $1.

Just a note: India power price is about half the price of Rs.8 and if anything it will fall furthe

Thank you very much for making it clear for every one Im glad you have done such a hard work ,Now I will explain each and every point of your argument

CPEC all investments are backed by Chinese EXIM and Central Bank of China at interest rate of 1 or less then 1% in some cases 0% .Now coming to the point of sovereign guarantee its true and pay back are also the same but these all decisions are based on 2013 and in 2013 our credit rating was no where infact what Chinese investment or AKA Loan has done is revamping all the infrastructure for Pakistan which was 19th century Thanks to India who never pay equal share of wealth after 1947 and Now Indians are concerned over projects being done .Its funny in 1993 Indians were selling there gold to bail out economy what happened after that is the real miracle of Inflated GDP thru FDI as all nations start pouring FDI in India making India or at least trying to make India CHina ,On the other hand Pakistanis are ok with Chinese infact we are more than happy that some one will be governing the issues other than US and last not the least Chinese have plan to relocate industry its funny when you put such high facts you forget that we have around 4 -5 Thousand MW of industry shut down ,Chinese are buying them and making them active again the projected GDP growth rate is expected to remain above 6% for next 5-7 years so by the law of economics of 35 that is 7 years doubling the GDP with FDI pouring in from China in Heavy industries as well in other segments ,China needs Pakistan prosper not as take over state as the clear challenge in this region to India is Pakistan ,by the way i didnt see Sri Lankans shouting foul when it comes to port handling other than India ,CHeers

 

[ziaulislam]

The majority — $35 billion — of CPEC investments is for power plants. The agreements for what Pakistan will pay for each plant are surprisingly transparent and are posted on the website for the National Electric Power Regulatory Authority. The CPEC website lists projects, costs and progress.

The energy projects are treated as investments by Chinese companies, but they are actually loans plus fixed returns to equity. Once constructed, Pakistan will buy what the plants produce at the 8.50 rupee rate. The rate pays back the loan that the Chinese company took from a Chinese bank to build the plant; a commercial 5 percent interest rate; a one-time payment equal to 7 percent of the cost of the project as insurance against default (even though Pakistan has offered sovereign guarantees); and a 15 to 20 percent return on equity. The rate of return is high but standard across similar projects that fall under the country’s policy for independent power producers.

What Pakistan owes for the next 30 years will be calculated in dollars frozen at the 2013 exchange rate of 97.10 rupees to $1.

Just a note: India power price is about half the price of Rs.8 and if anything it will fall further

Thank you very much for making it clear for every one Im glad you have done such a hard work ,Now I will explain each and every point of your argument

CPEC all investments are backed by Chinese EXIM and Central Bank of China at interest rate of 1 or less then 1% in some cases 0% .Now coming to the point of sovereign guarantee its true and pay back are also the same but these all decisions are based on 2013 and in 2013 our credit rating was no where infact what Chinese investment or AKA Loan has done is revamping all the infrastructure for Pakistan which was 19th century Thanks to India who never pay equal share of wealth after 1947 and Now Indians are concerned over projects being done .Its funny in 1993 Indians were selling there gold to bail out economy what happened after that is the real miracle of Inflated GDP thru FDI as all nations start pouring FDI in India making India or at least trying to make India CHina ,On the other hand Pakistanis are ok with Chinese infact we are more than happy that some one will be governing the issues other than US and last not the least Chinese have plan to relocate industry its funny when you put such high facts you forget that we have around 4 -5 Thousand MW of industry shut down ,Chinese are buying them and making them active again the projected GDP growth rate is expected to remain above 6% for next 5-7 years so by the law of economics of 35 that is 7 years doubling the GDP with FDI pouring in from China in Heavy industries as well in other segments ,China needs Pakistan prosper not as take over state as the clear challenge in this region to India is Pakistan ,by the way i didnt see Sri Lankans shouting foul when it comes to port handling other than India ,CHeers

most Ramu words are speculation
he is wrong

1. on cost ......................see NEPRA site for it coal price is 7.4 leveled or 8 rs, for thermal its around 7 and for hydro at around 8 for 25 years and than FREE transfer to govt..i doubt india produces electricity are rs 6 cent, but i will appreciate if you give me a example of coal plant which is giving levelized price of 6 cent(imported coal)..thar coal is unique pricing model but after 10 years it cost will be 4.47 cents. regardless this is upfront tariff not compatible biding
2. that they are loans.........loans are given to private firms (e.g ENGRO)or JV of pakistani and chinese firm(sino-sindh), or in most case chinese firms(china power) or rare cases a govt form(pak nuclear energy commission) or ver rare govt(highways)
3. there have been many GRANTS like gawadar air port of 300M
4. there are very generous returns in pakistan but they are not exclusive to china

 

[volatile]

most Ramu words are speculation
he is wrong

1. on cost ......................see NEPRA site for it coal price is 7.4 leveled or 8 rs, for thermal its around 7 and for hydro at around 8 for 25 years and than FREE transfer to govt..i doubt india produces electricity are rs 6 cent, but i will appreciate if you give me a example of coal plant which is giving levelized price of 6 cent(imported coal)..thar coal is unique pricing model but after 10 years it cost will be 4.47 cents. regardless this is upfront tariff not compatible biding
2. that they are loans.........loans are given to private firms (e.g ENGRO)or JV of pakistani and chinese firm(sino-sindh), or in most case chinese firms(china power) or rare cases a govt form(pak nuclear energy commission) or ver rare govt(highways)
3. there have been many GRANTS like gawadar air port of 300M
4. there are very generous returns in pakistan but they are not exclusive to china

I dont know what to say as your argument dies with notion e.g the tariff are announced based on the private investor interest as well since no one was willing to invest so its a breath of fresh air as after uninterrupted supplies to industry the GDP has taken upside from mere 3% to 5.5% in this LSM are major revamping with increase productions e.g Cement is going to be increased from 3 Crore Tons so that's a bog number ,Auto sector is going to get major share with out electricity nothing going to happen Now labour rates are still the cheapest and product is made of Utility , Labour so incase of Pakistan the business men will find there way if not some one new comes on newer terms ,They are loans and are given to Chinese firms it has nothing to do with SBP loan record ,Who will see 25 years as major National Electric policy was devised to adress short /medium and long term needs ,Coal as well as LNG are the cheapest to make as well as quickest ,Now focus is on securing long term and sustainable things will not happen in a day but we are moving to that .Grants are good specially for undeveloped cities and even here your argument dies as Chinese are investing to make this sustainable not to capture it

 

[ramu]

most Ramu words are speculation
he is wrong

1. on cost ......................see NEPRA site for it coal price is 7.4 leveled or 8 rs, for thermal its around 7 and for hydro at around 8 for 25 years and than FREE transfer to govt..i doubt india produces electricity are rs 6 cent, but i will appreciate if you give me a example of coal plant which is giving levelized price of 6 cent(imported coal)..thar coal is unique pricing model but after 10 years it cost will be 4.47 cents. regardless this is upfront tariff not compatible biding
2. that they are loans.........loans are given to private firms (e.g ENGRO)or JV of pakistani and chinese firm(sino-sindh), or in most case chinese firms(china power) or rare cases a govt form(pak nuclear energy commission) or ver rare govt(highways)
3. there have been many GRANTS like gawadar air port of 300M
4. there are very generous returns in pakistan but they are not exclusive to china

Dude, over confidence often borders on arrogance. What If I site an article saying exactly this. Will you eat your words?

“The Chinese rate is 8.50 rupees per kilowatt hour of coal,” says the retired official. “An efficient rate would have been 5 rupees. In India, it’s about 4 rupees. One would expect a good environmental package with their [high] rate. But they are not putting in the required controls.”

https://www.devex.com/news/pakistan-s-100b-deal-with-china-what-does-it-amount-to-90872

In the same article you will find interest rates of loans on non energy projects.

 

[ziaulislam]

Dude, over confidence often borders on arrogance. What If I site an article saying exactly this. Will you eat your words?

“The Chinese rate is 8.50 rupees per kilowatt hour of coal,” says the retired official. “An efficient rate would have been 5 rupees. In India, it’s about 4 rupees. One would expect a good environmental package with their [high] rate. But they are not putting in the required controls.”

https://www.devex.com/news/pakistan-s-100b-deal-with-china-what-does-it-amount-to-90872

In the same article you will find interest rates of loans on non energy projects.

okay dude...

i said quote objective values, i would have liked an official objective source, we know Pakistan is offering 7.4 cents at a high return of RR 17% for 1000mw plants

we already know whats in Pakistan what is the price in india for imported supra critical plants? you mentioned its way cheaper and i dont believe that

if its rupees 4 in india that is 6.2 cents vs levelized 7.4 cent in pakistan
all plants are supra critical with very high stringent measures, you can check it on their website

 

[ramu]

okay dude...

i said quote objective values, i would have liked an official objective source, we know Pakistan is offering 7.4 cents at a high return of RR 17% for 1000mw plants

we already know whats in Pakistan what is the price in india for imported supra critical plants? you mentioned its way cheaper and i dont believe that

if its rupees 4 in india that is 6.2 cents vs levelized 7.4 cent in pakistan
all plants are supra critical with very high stringent measures, you can check it on their website

Did I not say Pak politicians are not willing to disclose the terms and conditions let alone fineprint of CPEC? I have given you a source. You said I was speculating + wrong.

Price of electricity in India: Solar power at Rs.2.62 per unit. Thermal: Rs. 3 per unit.

Source: http://www.independent.co.uk/enviro...helan-aaada-bhadla-plyush-goyal-a7730226.html

 

[ziaulislam]

Did I not say Pak politicians are not willing to disclose the terms and conditions let alone fineprint of CPEC? I have given you a source. You said I was speculating + wrong.

Price of electricity in India: Solar power at Rs.2.62 per unit. Thermal: Rs. 3 per unit.

Source: http://www.independent.co.uk/enviro...helan-aaada-bhadla-plyush-goyal-a7730226.html

doesnt help but okay