Review of power purchase deals: Government decides to approach Chinese leadership

The government has reportedly decided to approach Chinese top leadership, seeking review of Power Purchase Agreements (PPAs) of power projects established under China-Pakistan Economic Corridor (CPEC), well-informed sources told Business Recorder.
A couple of days ago, a high-level meeting presided over by Prime Minister Imran Khan, discussed pros and cons of the proposal, which will be discussed in the Joint Energy Working Group on Energy constituted under CPEC and will be sent to the Chinese President.
"Pakistan enjoys extreme goodwill with China that has been proven time and again during emergent situations," an official statement quoted Prime Minister Imran Khan as saying in the meeting. All Power Purchase Agreements with Chinese are based on Government-to-Government (G to G) basis and the Prime Minister can use his leverage for review of the agreements.
China will get maximum benefit from these projects when Silk Route will be operational.
Chairman, CPEC Authority Lt-Gen. Asim Saleem Bajwa (retd) briefed the meeting in detail about progress on CPEC projects. During the briefing the chairman CPEC Authority apprised that there are a total of 22 projects in the CPEC's energy portfolio, among which 9 have already been commissioned. Detailed briefing was provided on energy sector projects including Kohala Hydropower Project, Azad Patan Hydropower Project, Gwadar Power project, power projects in Thar and Karot Hydropower Project.
The government has not used its leverage so far with the Chinese government to renegotiate agreements, which according to some experts needed to be reviewed.
The government of Pakistan had set tenure of 10 years and agreed on Sinosure at 6 percent and interest cost Libor plus 4.5 percent.
The sources said, that Pakistan has requested the Chinese leadership to double the tenure of projects, i.e, from 10 years to 20 years as the key component of tariff is loan. Pakistan may also request Chinese leadership to reduce interest rate from 4.5 percent to 2 percent.
The sources said, with these steps Pakistan can get benefit of $ 500-600 million per annum which will be a huge benefit in current circumstances.
An official, who is well aware of this development, told Business Recorder that China is Pakistan's sincere and time tested friend and when this proposal will be tabled before the top Chinese leadership, Pakistan is very hopeful of a positive response.
Chinese President Xi Jinping is expected to visit Pakistan in the next couple of months if the coronavirus crisis is over. Pakistan's President, Dr Arif Alvi along with Minister for Foreign Affairs, Shah Mehmood Qureshi and Minister for Planning, Development and Special Initiatives, Asad Umar recently visited China to show solidarity with China when no other Head of State was ready to visit China.
The government has also finalized an agreement with the existing Independent Power Producers (IPPs) though its final approval is awaited as the issue of M/s Rouch Power remains to be settled.