PM’s plants conversion claim not accepted: Phasing out gas, FO could save $3bn per year: China

ISLAMABAD: China has reportedly rejected Prime Minister Shehbaz Sharif’s claim that converting imported coal power plants to local coal could save $1.2 billion annually. Instead, Chinese officials suggested that Pakistan should focus on phasing out gas and furnace oil-fired plants which could save $3 billion annually.

These remarks were shared with Sardar Awais Ahmad Khan Leghari, Minister for Power, who attended the 3rd Belt and Road Energy Ministerial Conference in Qingdao from October 23-24, 2024.

During the conference, Minister Leghari participated in the opening ceremony, a parallel forum, and held four bilateral meetings, including with Administrator Zhang, the Iranian Energy Minister, and several business enterprises.

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According to sources, during a bilateral meeting with Administrator Zhang, Minister Leghari emphasized Pakistan’s commitment to pursuing power sector reforms, including privatizing DISCOs and modernizing the transmission and dispatch systems. These reforms aim to improve the efficiency of the energy sector and reduce electricity costs. Minister Leghari also referred to Prime Minister Shehbaz Sharif’s meeting with Premier Li in October 2024, where they discussed Chinese cooperation in three key areas: (i) converting three imported coal-fired power plants to Thar coal, (ii) debt re-profiling for CPEC energy projects, and (iii) the digitalization and modernization of power distribution and dispatch systems. In response, Administrator Zhang noted that following Prime Minister Shehbaz Sharif’s meetings with Chinese leadership in June this year, he had been personally engaged in conducting a study on the proposals made by the Prime Minister in his ‘personal watch’.

At the meeting, he shared some findings of the study on conversion of imported coal-fired power plants on local coal. The conversion of coal-fired power plants (Sahiwal, Hub and Port Qasim) on Thar coal required huge investment, resulting in potential escalation of power tariff for local consumers. Pakistan’s claim of $1.2 billion savings (quoted in Prime Minister’s letter addressed to Premier Li) was unrealistic as the price of the coal had dramatically reduced worldwide. Given that the rate of investment on the conversion of power plants would be high, the proposal of conversion would be least cost effective (commercially). He recalled that Pakistan was still relying on production of electricity through gas and furnace oil and spending more than $3 billion to run such power plants. As a way forward, he proposed instead of conversion of three power plants on local coal, Pakistan must prioritize phasing out those power plants which were running on gas and furnace oil. This would result savings of $3 billion annually.

Commenting on debt re-profiling, Chinese financial institutions were the relevant stakeholders. The matter may be pursued with them directly as the NEA had no lead role to play on the issue.

On enhancing efficiency of the power system, as both sides had already agreed to implement the MoU on enhancing efficiency of power sector, signed between China’s NEA and Pakistan’s Power Division in June this year, China was ready to send its team of experts to Pakistan for conducting a comprehensive study aimed at cutting line losses and tariff management. At Power Minister’s intercession, NEA Administrator agreed to conduct ‘joint’ study on the conversion of power plants on local coal.

Copyright Business Recorder, 2024