Conversion of power plants to Thar coal: Govt likely to ask local banks for financing

ISLAMABAD: The government is likely to ask local banks to finance conversion of imported coal projects to Thar coal and expansion of mines, well informed sources in PPIB told Business Recorder.

This idea was recently discussed in an interaction of 17 individuals including officials of Pakistan, Chinese experts and senior officials of Chinese embassy in Islamabad, the sources added.

These discussions were held a couple of weeks before the constitution of a formal committee by Minister for Power Sardar Awais Leghari.

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During the course of discussion, Pakistani side led by the Additional Secretary Power Division-1, Khushhal Khan highlighted that coal conversion is critical to improve generation capacity and reduce fuel payments per unit, and enable scaling up Thar coalfields, reducing cost of coal per ton, while enhancing energy security.

Initial study was conducted by M/s Fichtner of Germany which supported conversion of plants from imported coal to local Thar coal.

According to sources, Pakistani team indicated that CAPEX for conversion of power plants and expansion of mines can be financed by local banks and will not affect status of Chinese/ current lenders exposure. It was further said that Railway line for transportation of coal from Thar is already under construction and will be ready before conversion of projects on local coal.

“Conversion to local coal will improve dispatch, increase revenue for power plants, while reducing tariff for the consumers from Rs 16.4 per unit to Rs 7.03, Rs11.40 per unit for CHHGC, Port Qasim and Sahiwal, respectively,” the sources quoted Pakistani officials as saying.

The government estimates also suggest that forex savings up to $892 million will be available for IPPs dividend repatriation and debt repayments and resolve liquidity problems to a certain extent; besides conversion will help make Pakistan’s power sector financially sustainable.

Chinese side was of the view that conversion of imported coal-based power plants to local coal; i.e., Thar was thoroughly discussed in the eighth EPEP meeting held on May 15-17, 2024. They argued that while conversion is quite meaningful and can fix a number of relevant issues including Forex savings and reduction in tariff but it also involves many aspects including technical adaptation. Chinese side offered the following remarks “conversion has posed many concerns to the Chinese entities as Thar coal may impose problems to the equipment of Chinese existing plants.”

Chinese side feels that there is huge gap between estimates given by Fichtner (consultant) and the estimates worked out by the project sponsors. Chinese enterprises will have to adopt appropriate technology to use Thar coal and get approvals from China side stakeholders as it would be a complex process.

The sources said, Chinese side further stated that it had raised concerns in 2017, during second EPEP meeting, with respect to coal transportation and transmission line, etc. China side stated that though they have raised many questions on coal conversion, yet they hope that it will go successfully.

The leader of the Chinese delegation stated that he would like to suggest National Energy Administration (NEA) to accommodate the concerns of both sides in this regard.

It was suggested that Chinese enterprises together with their Pakistani counterparts should conduct a joint feasibility study about coal transport, origin, quality, security etc. before taking decision on the conversion.

China side also suggested discussing it further at the expert level and work out further promotion of the Pakistani proposal about coal conversion. Chinese side extended cooperation and stated that Chinese experts are open to discussion anytime. Chinese are open to an invite to German Consultant Fichtner for dialogue during joint study as well.

According to sources, there was consensus that implementation of proposal on coal conversion should accommodate concerns of both sides.

Copyright Business Recorder, 2024