ISLAMABAD: Chinese embassy has reportedly forewarned Pakistani authorities to solve payment concerns of Chinese power projects to avoid the worst scenario happening, well informed sources told Business Recorder.
Chinese embassy, sources said, conveyed its message to the Ministry of Foreign Affairs, which has subsequently informed the Prime Minister’s Office and other concerned Ministries.
The government, sources said, has been unable to pay over Rs 100 billion to Chinese power plants established under China-Pakistan Economic Corridor (CPEC) framework. A dedicated office has already been established to facilitate Chinese projects.
Chinese embassy, in its letter, has informed the government that due to sharp rise of coal price, and delayed payment of tariff, Huaneng Shandong Ruyi (Pakistan) Energy Limited (HSR), Port Qasim Electric Power Company (Private) Limited and China Power Hub Generation Company (Private) Limited have approached the embassy for assistance in addressing the payment issue to the Pakistan’s relevant authorities, as they are facing critical situation in their operations with some on the brink of bankruptcy (as the coal inventory for HSR at site is only for 5 days).
According to the embassy, these CPEC energy projects have been making significant contribution to unhindered power supply in the country, accounting for almost one fourth of total generation of Pakistan, with very low and most affordable tariff. These companies are now facing imminent liquidity crunch. In the worst scenario if these power units shut down, it would negatively impact on the national power supply and on sustainable growth of industries, and adversely affect Pakistan government credit guarantee, assessment of market risk, as well as financing for new projects.
Chinese embassy has urged relevant authorities to take practical steps to ease their reasonable concerns and solve the payment issue to avoid the worst scenario from happening.
The outstanding receivables of CPHGC stood at Rs 55.362 billion as on February 25, 2022 out of which Rs 37.231 billion is overdue.
Port Qasim Electric Power Company (Private) has also written letters to the concerned authorities for payment of overdue to amount of billions of rupees. On February 11, 2022, 1320 MW Port Qasim Coal-fired Power Project maintained in a letter that total payment due has reached Rs 65 billion (US $ 368 million) with a delayed payment period of over 5 months which could further escalate due to a surge in the international coal price.
The power company highlighted that the current due amount has entitled PQEPC to proceed to suspend the plant operation according to PPA Section 9.10 without any Liquidated Damages (LDs).
The power company maintained that it has low tariff advantage, and is in a lose-lose situation if suspension is triggered; therefore, timely settlement of due amount of the project is required to ensure sustainable power generation and avoid Agreement Default and the GoP sovereignty guarantee default.
The company further contended that such high overdue amount caused an adverse impact to PQEPC operation, including: (i) CPPA-G payment is far less than the minimum fundamental cost, huge shortfall and loss is constantly being borne by PQEPC; (ii) huge loss due to Rupee devaluation; (iii) coal supply interruption risk; and (iv) extra working capital pressure due to international coal price increase.
Private Power & Infrastructure Board (PPIB), which deals with the private IPPs, normally forwards the letter of IPPs for early resolution of their issues but the ball is always in the court of Central Power Purchasing Agency-Guaranteed (CPPA-G).
CPPA-G recently informed the Power Division that it is unable to ensure payment to the CEPC power projects due to low recoveries from Discos and requested Power Division to seek Rs 100 billion Supplementary Grant to clear a portion of CPEC projects.
The Government had approved Rs 100 billion to pay CPEC projects against pending amount of Rs 300 billion prior to the visit of Prime Minister Imran Khan to China last month.
Copyright Business Recorder, 2022
Comments
Comments are closed.