As shared by some credible sources, Chinese coal power producers have expressed their concerns to Prime Minister Shahbaz Sharif. The Port Qasim coal-fired power station has proposed using RMB to purchase coal in order to relieve pressure on dollar.
Port Qasim coal-fired power project is jointly developed by PowerChina Resources Limited (51% shares) and Al Mirqab Capital (49% shares), which is one of the largest prioritized projects in the energy sector of the China-Pakistan Economic Corridor (CPEC).
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Coal prices have significantly gone up and the outstanding amount of Chinese coal-fired power plants is more than Rs 350 billion which is preventing them from buying coal.
According to sources, the Prime Minister has been informed that three coal power plants do not have adequate funds/US dollars to acquire coal due to a large overdue amount owed by CPPA (G) and exchange limitations imposed by SBP.
Chinese coal power stations are unable to operate at full capacity because of inadequate levels of coal in stock. Chinese have stated that all coal power plants cannot operate at full capacity due to a lack of coal supplies, while CPPA-G is unfairly deducting capacity payments.
Every month, the Power Purchase Agreement (CPPA -G) has been requested to pay the tariff in full and on time for acquiring the coal purchase funds, debt service repayment, and other fixed costs. According to the Implementation Agreement (IA), the State Bank of Pakistan (SBP) has been asked to meet each power plant’s exchange demand on time to ensure that each power plant has enough foreign exchange to import coal.
Moreover, Chinese coal producers have also forwarded a request to Ministry of Energy that following the Prime Minister’s meeting on May 30, the CPPA-G be instructed to exempt capacity payments from deduction and restore the deducted portion if power plants are unable to purchase coal and generate electricity due to tariff payment issues and foreign exchange.
The Prime Minister has also been told that the Port Qasim project can utilize Renminbi (RMB) to acquire coal to support Pakistan’s pressure owing to a lack of US dollars and has requested that SBP assist Port Qasim in exchanging RMB.
Chinese coal power stations have also asked the Ministry of Energy and NEPRA to enable the additional expense of exchanging RMB to be passed on to the CPPA-G.
In a letter to high government officials, Zhang Jun, Chairman Energy Investment of All-Pakistan Chinese Enterprises Association (APCEAP), accused the CCPA-G of violating agreement stipulations.
Chinese power sector investors claim that a large amount of arrears, combined with the PKR’s increased depreciation in recent years, has significantly reduced the nominal return on investment, exposing such Chinese enterprises to high audit risks in the future, as well as dampening further investments in Pakistan by other Chinese investors.
Similar to Independent Power Producers (IPPs), more than ten Chinese investors, who have invested in power projects in Pakistan, have formed an Association, i.e., Energy Enterprise Association (EEA) to share their problems, concerns, demands and future proposals.
Due to the regular devaluation of the Pakistani Rupee, Chinese investors who invested in Gwadar recently requested that the government allow them to keep their bank accounts in RMB.
The EEA noted in its letter that since 2014, cumulative investment by Chinese firms in CPEC power projects has reached $19.961 billion, with a total installed capacity of 10,876 MW, 5,887 MW of which has already been placed into operation. These power projects have an annual power generation capacity of 35.86 billion kWh, which accounts for one-third of Pakistan’s total power generation (approximately 130 billion kWh) in recent years.