Conversion of power plants to coal: NEA of China seeks to set up working group for talks

ISLAMABAD: The National Energy Administration (NEA) of China is said to have shown willingness, in principal, to establish an ad hoc working group to facilitate discussion on conversion of three imported coal-fired power plants to local coal, well-informed sources in the PPIB told Business Recorder.

This update was shared with the Power Division which is finalizing sectoral plan to support Government of Pakistan’s (GoP’s) effort to move out of the low growth trap.

According to sources, Chinese side will be represented by officials from NEA’s department of International Cooperation, its Planning Department, and Chinese enterprises involved in the operations of power plants in Pakistan.

PowerChina keen to convert imported coal plants to local coal ones

Moreover, Ministry of Energy (Power Division) has constituted a Committee under Additional Secretary-1, to coordinate with IPPs and stakeholders for joint feasibility studies on converting plants to Thar coal, assess coal transportation logistics, review and finalize studies, and provide recommendations and an implementation plan for conversion.

On supply of local coal to Lucky and Jamshoro, PPIB stated that Financial Close (FC) for mine expansion (phase-III) of Thar Block by SECMC is under process which is expected by the end of 2024.

As reported by SECMC Commercial Operation Date (COD) of phase-III is expected in March 2025 after which coal will be supplied LEPCL. Moreover, with regard to coal supply to Jamshoro power plant, SECMC, K-Electric and GHCL are in a better position to provide current status.

PPIB further stated that execution of coal supply agreement between SECMC and Jamshoro pertains to SECMC and Government of Sindh.

The sources said, Finance Ministry is also in discussions with the local banks to finance conversion of three imported coal plants to local coal and in this regard two or three meetings have been held at the Ministry of Finance.

In another meeting at PPIB, it was disclosed that 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 noted 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.

The Chinese side argued that conversion of imported coal-based power plants to local coal, ie, 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 pose problems to the equipment of Chinese existing plants.”

Chinese side maintained 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 suggested that NEA accommodate the concerns of both sides in this regard.

Copyright Business Recorder, 2024