Power projects: Chinese company seeks security assurance, repayment guarantee

Chinese insurance company, Sinosure, has sought security assurance and Government of Pakistan (GoP) guarantee of repayment for the power projects to be established with Chinese investment, official sources told Business Recorder.
Presently, four projects ie Neelum -Jehlum hydropower project, Nandipur, Chichokimalian and Guddu thermal power projects are in different stages of approval. The sources said a high level team of Pakistan Electric Power Company (Pepco) is scheduled to visit Beijing shortly to finalise financing arrangements with the Chinese companies.
Expor-Import (Exim) Bank of China, HSBC Bank, BNP Paribas (China) and Harbin Power Engineering (HPE) China are the main stakeholders, which will provide financial and insurance facility for the projects under process, the sources added.
The sources said Exim Bank has agreed to finance 85 per cent of project cost,k which constitutes equipment to be imported from China. The bank is also willing to work as co-arranger for the balance required to purchase equipment, which will likely be imported from the GE (USA) or France.
However, the Exim Bank has set a tough condition: it would only provide finance for the project if Pepco first provides 10 per cent advance payment and the remaining five per cent before the Bank starts disbursement, the sources added. Another surprising development for Pakistan was that the Sinosure (China Export and Credit Insurance Corporation) has clearly indicated that it would provide insurance cover for only Chinese content and GE USA/ France gas turbines will not be covered.
" We can provide insurance cover for three to nine years' period as we can cover up to 10 year repayment period," the sources quoted Zhang Hui, project underwriting department, Sinosure, as saying during the last meeting held between Pepco and Chinese officials in Beijing. The sources said Beijing-based BNP Paribas office, an internationally reputed French bank, was not willing to finance those power sector projects which are not part of the list that was presented by Pakistan government to the Chinese government.
The sources said Guddu, Nandipur and Chichokimallian projects were not included in the list given to the Chinese government.
Regarding Nandipur, HSBC was of the view that the project had been approved by Sinosure, but this approval was not enough as there were certain other approvals needed, including the approvals of Chinese Ministries of Commerce and Finance. This process may take three to six months further. Sinosure, China's first wholly state-owned policy insurer can insure both China's overseas investments and overseas investments in China, guaranteeing either shares or loans. The sources said all the confronted issues have been discussed with the Chinese officials who recently visited Pakistan and the government was very much hopeful that the bottlenecks in the way of Chinese investment would be removed very soon.
Prime Minister, Syed Yousaf Raza Gilani has also approved a summary of the Ministry of Water and Power regarding to dispatch a team to Beijing to finalise financing arrangements with the Chinese companies.