ISLAMABAD: A delegation led by US Department of State’s Special Representative for Commercial and Business Affairs, Dilawar Syed will be visiting Islamabad, Lahore, Sialkot, and Karachi from July 1-9, 2022, official sources told Business Recorder.
He will be accompanied by Gaia Self, Regional Policy Lead for Europe and Central Asia at the US International Development Finance Corporation (DFC).
According to sources, the visit is crucial to promoting investment in Pakistan and building further on the existing economic ties between Pakistan and US.
The US Embassy has requested for meetings with Ministry of Commerce, Ministry of Finance, Ministry of Energy, and Board of Investment (BoI) on July 1, 2022.
The delegation has also sought a meeting with Ministry of Foreign Affairs which is to be scheduled on the same date.
The US Embassy has further proposed that given the shortage of time, meetings with Ministry of Commerce and BoI be clubbed as per feasibility.
Recently, DFC showed willingness on revision of Power Purchase Agreements (PPAs) of its sponsored wind power projects subject to concessions from Government of Pakistan (GoP).
The World Bank is urging Pakistan to also renegotiate PPAs with IPPs sponsored by DFC. The US Embassy in Islamabad has also been involved with the Power Division on this issue.
Pakistan’s Trade Minister in Washington, Azmat Mahmud has informed Islamabad that he met with Millard Callear, VP & CFO of DFC and Gaia Self, Regional Policy lead for Europe and Central Asia, to seek further clarity on the observations of the DFC pertaining to wind power projects (IPPs) sponsored by DFC.
As discussed during meeting with CEO Nathan, the representatives once again apprised them that Government of Pakistan initiated the process to review PPAs of IPPs in pursuance of the World Bank’s sponsored Programme for Affordable and Clean Energy (PACE), which requires prior action of revision of generation tariffs for IPP.
Pakistan’s Trade Minister, Azmat Mahmud, in a letter stated that he has further informed them that the majority of IPPs have entered into an agreement with GoP to revisit the tariff. However, remaining IPPs including 5 wind power projects sponsored by DFC have yet to follow suit.
Gaia Self, in her response, stated that in the spirit of increased close cooperation on investments between DFC and Pakistan, her leadership trusts that a mutually beneficial solution to finalize the PPA renegotiations can be found, while at the same time preserving the conditions essential for future investments in this sector.
She further urged Government of Pakistan to continue discussing with the sponsors and offer any available concessions on operations, maintenance costs, and insurance costs, which DFC does not control.
As senior lender, she indicated DFC retains consent rights on the final PPA renegotiation terms.
Millard Callear stated that in response to the Government of Pakistan’s call in 2020 to lower tariffs across all Independent Power Producers (IPPS), DFC had proposed a generous solution that would honor existing contracts and immediately reduce tariffs on DFC-supported wind projects by an estimated 20%-30%. Specifically, DFC proposed to assume additional risk by offering a longer tenor (+5 years) at reduced interest cost (50 basis points).
The purpose of these concessions, she suggested, is to help Pakistan achieve its energy sector reform milestones, while preserving the sanctity of contracts and avoiding a reduction of private shareholders’ return on equity. She indicated that DFC’s debt restructuring proposal remains outstanding on the part of GoP.
Copyright Business Recorder, 2022
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