Power Minister Awais Leghari on Saturday said the federal government has begun reviewing terms of Chinese independent power producers (IPPs) regarding debt reprofiling and the sourcing of coal.
Last month, Islamabad requested Beijing to convert imported coal-based projects to local coal and re-profile more than $15 billion in energy sector liabilities to create fiscal space amid difficulties in timely repayments.
Finance Minister Muhammad Aurangzeb said both sides had discussed conversions of Chinese power projects to local coal and how to take their technical, logistical, and financial parameters forward.
Leghari previously said that such a transition would benefit the Chinese-owned plants in Pakistan by reducing pressure on foreign exchange reserves, making it easier to repatriate dividends and offering a better return in dollar terms.
The transition could save Pakistan more than Rs200bn a year in imports, translating to a decrease of as much as Rs2.5 per unit in the price of electricity, the power minister had said.
Earlier this week, Leghari, in an interview with Voice of America, said that China, like the International Monetary Fund (IMF), wanted to see broader reforms from Pakistan.
To achieve that, the minister had said Pakistan had “already authored and embarked upon an entire economic or power sector reform” as desired by China and the IMF.
“It’s going to be a win-win situation for everyone,” Leghari had said, rejecting concerns of reduced savings for Pakistan as a result of possible higher profit margins demanded by Chinese investors.
“Unless that isn’t there, people will not invest, lenders will not give money.”
Stating that terms and conditions decided with Chinese IPPs needed “another look”, Leghari had affirmed there was an “overwhelming response to have a look and run technical and financial feasibilities on all the aspects of coal conversion and reprofiling”.
Expanding upon his VOA interview, Leghari told Dawn.com today: “We are not beginning but have already begun the review together with the Chinese government in debt reprofiling and coal conversion to local coal.
“We are reviewing and studying the overall landscape of the power sector’s entire generation, including IPPs and government-owned plants. So it’s not specifically one kind and one sort.”
He highlighted that he was currently leading a task force that was formed recently to conduct a study of the IPPs, adding that experts had also been taken on board.
“I had clearly stated that all investments of the Chinese IPPs and the CPEC (China-Pakistan Economic Corridor) have been made under G2G (government to government) conditions.
“In those conditions, we have already begun reviewing them (IPP contracts) from two different angles — one is debt reprofiling and the other is of the investments they made to produce energy through imported coal,” Leghari explained.
He went on to add that Pakistan had already begun “coal conversion to local coal to reduce the cost of using local coal resources for Pakistan’s [energy] sector”.
“So we have begun conducting its study together with the Chinese from only these two angles. Working groups have also been established to do the same,” the power minister said.
