ISLAMABAD: The Chinese Company has left a 330MW coal based power project due to lower tariff cost.
The cost of the project is $590 million, which was scheduled to start electricity generation by the end of 2017. It was the key component of 46 billion dollar China Pakistan Economic Corridor (CPEC). The letter of interest (LoI) was issued to develop the project on local coal at Pind Daden Khan in Punjab’s Salt Range.
Sources told Daily Times that due to the lower tariff allowed by the National Electric Power Regulatory Authority (NEPRA) and the feasibility of producing enough energy for running a 330MW project, China Machinery Engineering Corporation (CMEC) has lost interest in the project.
The company had been lobbying for 11.67 to 12.4 cents per unit tariff that was far higher than upfront tariffs for projects on Thar Coal and imported coal. NEPRA allowed a 30-year levies tariff of 8.55 cents per unit.
In such a scenario, China would have monopoly over financing for coal projects, which may be provided at higher rates. This was the reason behind the NEPRA’s decision to increase the rate of return from 17% to 22% for Engro Coal Mining Projects in Thar, which was funded by China.
According to the reports that several coal mining companies are defaulting on payments including those working in the United States and China following a slowdown in economic growth and an anti-pollution drive that has pushed coal prices to near four-year lows.
The PPIB had encashed $300,000 performance guarantee of the project sponsor for its failure to deliver on LoI conditions
The government’s power policy required submission by the sponsor of a performance guarantee of $1,000 per megawatt for fulfillment of LoI conditions and $5,000 per MW performance guarantee for letter of support conditions. The guarantees are confiscated by the government in case of sponsor’s failure.
The project envisaged power generation along with coal mining project in the area of Choa Sedan Shah with an average production of about 6,000 tons of local coal per day. The CMEC had promised to introduce semi-mechanized mining technique for the first time in the region with an investment of $200 million.
Moreover, experts expressed their concern saying the situation is alarming as Pakistan is going through severe electricity crisis. They also showed their apprehensions that if Pakistan keeps continue to follow this path, crisis might take the worst form.