Power projects of the China-Pakistan Economic Corridor (CPEC) face further risk of default on the upcoming debt repayments, as their outstanding dues have jumped above Rs340 billion amid Pakistan’s back-pedaling on fulfilling its contractual obligations, a Karachi daily said..
11 Chinese power companies are facing serious issues due to the mishandling of their investment by the Pakistani authorities. Of these, eight independent power plants (IPPs) are waiting for the clearance of their cumulative dues of Rs340 billion to cover the cost of power generation, the Express Tribune reported citing official documents.
The Chinese are blaming the power transmission system of Pakistan for their woes, terming it as obsolete. One Chinese firm has reportedly demanded compensation for the losses they suffered on this account.
Despite their severe fiscal constraints, the Chinese power producers have not yet invoked sovereign guarantees that the government of Pakistan has extended to them, in case the power purchaser – Central Power Purchasing Agency-Guarantee (CPPA-G) – fails to make payments, the daily quoted sources as saying.
The 1,320-megawatt Port Qasim power plant faces the immediate challenge of clearing $83 million worth of debt by end May. Its liquiidity problems are because the government itself owed it Rs91.2 billion, while the power plant has to pay $140 million to the coal supplier, who has already stopped supplies, the report said
“Without urgent payments to restore coal supply, the whole complex will shut down shortly,” the company warned. “Since 2014, billions of US dollars have been invested, thousands of people have worked hard for seven years but today the company has no cash, low coal inventory, huge outstanding payments, a huge exchange loss, making coal supplier and operation and maintenance contract bankrupt and facing loan default soon,” complained the company officials in talks with the Pakistani authorities, the Karachi daily reported.
The plight of the 1,320MW Sahiwal coal-fired power plant is no different. Its outstanding recoveried are around Rs. 96 billion. The plant is a venture of the Huaneng Shandong Rui Group of China.
Hdyro China Dawood wind farm and power project is seeking $13 million in compensation from the Pakistani authorities for the losses that it is sustaining due to the transmission of electricity through a single transmission line. The firm’s outstanding dues have reached Rs2.7 billion, according to Express Tribune, which says that the UEP 100MW power plant is also facing the default scenario with its outstanding dues hovering around Rs4.3 billion. The 100MW Three Gorges wind power project is also experiencing similar problems due to its outstanding dues of Rs4.1 billion.
Result: Chinese financial institutions are now reluctant to underwrite the Kohala power project, the 700MW Azad Pattan power project and the 300MW Gwadar coal-fired power plant. The Karot power project too is facing “pressures” due to a tax dispute and cash problems arising out of the delayed commissioning of the project and currency devaluation.