$5bn Chashma-5 N-plant to produce power at Rs20 per unit: Country has swallowed a bitter pill?

ISLAMABAD: The dollar-deficient Pakistan is said to have accepted a bitter pill of $ 5 billion Chashma-5 (C-5) nuclear power plant at electricity price of about Rs20 per unit, substantially higher than Thar coal projects besides shelving renewable energy projects, well-informed sources told Business Recorder.

Last month, China and Pakistan signed a Memorandum of Understanding (MoU) for a 1,200 MW Chashma-5 (C-5) nuclear power project worth $ 3.48 billion with earliest availability in 2029.

The estimated capital cost of the project under IGCEP 2018-40 was calculated at $ 4.777 billion, IGCEP 2022-30 at $ 5.678 billion, IGCEP 2031-46 at $ 4.952 billion and IGCEP 2047 at $ 4.5 billion.

Pakistan, China sign $4.8bn N-power plant deal

The SPD signed a framework agreement for C-5 in April 2015 which was followed by signing of commercial agreement between PAEC and Chinese counterpart in November 2017. The C-5 was accordingly taken as committed projects in generation plans prepared in 2019 and 2022 based on strategic nature of projects.

In September 2021, the Council of Common Interests (CCI) approved an assumption set for preparation of new generation plan for 2021-30. However, factors like lower operational cost with much longer life of based load plants like Chashma Nuclear (C-5) power project were not factored in this plan.

In this plan the C-5 was redesignated as candidate project. Primarily this was done due to ‘Least Cost Principle’ used for planning with nuclear plants having higher initial capital cost.

Since in latest generation plan solar and hydro power has been given high priority and if C-5 is taken as committed project, around 1079 MW solar and hydro power shall be replaced but at the same time C-5 will add a reliable base load source to counter intermittent nature of renewables.

Proposed 1200 MW plant is designed to have efficiency of 37% and economic life of 60 years. Based on technical parameters C-5 cost is expected to be around S 4.952 billion while unit CAPAX comes to around S 4,342/kW, sources added. However, Chinese government gave a discount of Rs 30 billion.

As regards per unit cost, based on comparison with Thar Bloc-Il extension, levelized tariff for C-5 comes to around S 7.10/kWh for 60 years’ economic life as compared with tariff of a 660 MW plant at Thar which is around $ 5.47/kWh for 30 years’ economic life. Nuclear plants have higher initial capital cost but lower operational cost with much longer life. Chashma Nuclear (C-5) power project is a base load plant with high upfront cost. However, this fact is compensated by low operational cost and long operational life when compared with other base load options.

In the recent edition of IGCEP 2022-31 (under review/approval by Nepra), a sensitivity analysis/scenario has also been carried out by considering C-5 as a committed project. With C-5 as committed project, the optimized quantum of candidate solar PV and hydro decreases by 781 MW and 298 MW respectively, whereas, the wind capacity increases by 178 MW, as compared to the base case scenario. Thus, if taken as a committed project, C- 5 will displace renewables to a certain extent but at the same time add a reliable base load source to counter intermittent nature of renewables.

As regards per unit cost based on comparison with Thar-II extension, levelized tariff for C-5 comes to around Cents 7.10/kWh for 60 years of economic life as compared with tariff of a 660 MW plant at Thar which is around Cents 5.47/kWh for 30 years’ economic life which is also critical from the perspective of climate risk mitigation and energy security of the country through source diversification.

Location of C-5 is also very important as its proximity to load centers require relatively lower transmission cost as compared to other base load options or even remotely located renewables. Specifically, C-5 needs to be compared with other capital-intensive options like large hydro power projects like Dasu and Diamer Bhasha which not only require higher CAPAX but also requires high capital investment in transmission system for evacuation of power.

According to government’s analysis, for any base load generation, Pakistan has two options-coal plants at Thar or nuclear. Since coal is taken as dirty fuel, it has associated environmental challenges and going forward may face financing challenges or even other stricter actions. Thus, nuclear power may then remain only viable option for base load generation.

In September 2021, the government was informed that as per mutually agreed arrangement, 85 per cent of EPC cost was to be financed through Chinese loan and remaining 15 per cent local component and PAEC scope from revenue of operating plants. Consequently, loan application duly vetted by Economic Affairs Division, were submitted in September 2018 to CEXIM Bank, MOFCOM and China International Development Cooperation Agency (CIDCA) for financing of RMB 22.405 billion through Embassy of China in Pakistan. However, despite intermittent requests for update, no response has been received.

Meanwhile, CNNC/CZEC offered suppliers credit financing for the project with the following terms: interest rate at 3 per cent for a tenor 20 years. After negotiations progressed with Chinese, CZEC offered to improve parameters of gross capacity to 1,200 from 1,100 MW. Improved parameters will provide 100 MW of additional electricity at a cost of $ 75 million ($ 750/kW).

At the signing ceremony of MoU between Pakistan and China Prime Minister said under the difficult economic situation, investment from China in this project to the tune of $3.48 billion sent a clear message that Pakistan was a place where Chinese companies and investors continued to show their trust and faith.

Copyright Business Recorder, 2023