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Chinese govt rejects request to review rate of return on CPEC projects

Chinese Government and even the companies themselves have reportedly rejected the request by Pakistan's government to review the rate-of-return on the power projects set up under CPEC. The projects are 25 per cent more expensive than the average IPP contracts signed.

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The Chinese government has reportedly rejected the request by the Pakistan government to review the rate of return(RoR) on the power sector projects that were set up under the China Pakistan Economic Corridor(CPEC).

According to the national media agency Business Recorder, the Government of Pakistan’s request to review the Power Purchase Agreements (PPAs) has been rejected by not only the government but also the private companies.

The media agency reported that previously both the World Bank and the IMF have asked the government as to why the Chinese government and the companies were not approached when the power agreements with the IPPs were being revised and RoR was being reduced.

Special Assistant to Prime Minister on Power and Petroleum, Tabish Gauhar, testified before the Cabinet that power projects established under the CPEC are 25 per cent more expensive compared to prevailing international prices.

These projects include the Port Qasim coal power project, the Sahiwal coal power project, Engro Thar Coal Power & Mine Project, and Hubco coal power project.

However, the National Accountability Bureau issued an official statement denying this, saying that his statement, “is not based on facts”.

He reportedly even led the discussion regarding the higher prices at different platforms and even requested the former Chinese ambassador to convince the respective Chinese companies to sit with relevant departments on the issue. However, the ambassador refused to intervene and told him to take this issue to the companies himself.

In an interview with GVS’s Managing Editor Ms. Najma Minhas in June, SAPM Tabish Gauhar said with regards to Chinese response to the IPPs renegotiation, “So what they are saying to us is that look, we understand the issue, we want to help; although it may not be the same cookie-cutter approach that you had with the other IPPs, we will help you in some other way reduce the burden.”

Additionally, SAPM also told GVS that renegotiating such agreements is very risky, as these are sovereign guarantee-backed contracts, and the investors are unlikely to renegotiate the contracts, and instead, he said, “maybe there is an amount of capital that they can make available to us over the next three years or five years.”

Read More: Government seeks NEPRA’s approval on new power tariffs

This information backs up the sources by the Business Recorder that have also told that Chinese companies have also rejected the proposal of the government of Pakistan saying that on one hand they are not being paid their claims of billions of rupees and on the other, they are being asked for concession.

“Chinese can give a concession in another project but are not ready to review PPAs of power projects already established,” sources added.

Highest power generation 

Minister for Energy Hammad Azhar took to Twitter on 12th August to announce that on 11th August 2021, Pakistan achieved high-ever power generation and transmission of 24,467 MegaWatts.

He wrote, “For reference; in 2020, peak load registered was 23,370 MW for one day & in 2018 it was just 20,811 MW,” adding that average power demand & supply during these summer months is approx 20% more compared to last year.

Read More: Government decides to amend power theft law

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