Pakistan’s coal crisis looms large amid pending payments to Chinese plants

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Even after clear orders by Pakistani Prime Minister Shehbaz Sharif, the country’s government is unable to resolve the key issues being faced by Chinese imported-coal fired power companies as over Rs 350 billion overdue bills for these plants are an obstacle in coal purchase for Islamabad.

This comes at a time when coal prices have increased manifold. Business Recorder quoting sources said that this overdue bill has crippled Pakistan’s ability to buy coal because the country is marred with a shortage of US dollars.

One of the power projects namely, the Pakistan Port Qasim Power Project (PQEPC) in Sindh Province is able to use the renminbi (RMB), the official currency of the People’s Republic of China, to buy coal in a respite from pressure on Pakistan due to lack of US dollars.

Prime Minister Sharif was informed that the State Bank of Pakistan supported Port Qasim to exchange RMB in view of the given circumstances.

As the issue of buying coal looms large, on July 28, representatives of Chinese companies held a detailed meeting with Pakistan’s Finance Minister Miftah Ismail. During the meeting, several issues were highlighted including — tariff adjustment issues, liquidity damages, the opening of a revolving account, provision of foreign exchange and payment issues.

Among those who attended the meeting were the Minister for Power, Khurram Dastgir Khan, Minister for Planning, Development and Special Initiatives, Ahsan Iqbal, Minister of State for Finance, Dr. Aisha Ghaus Pasha, Special Assistant to the Prime Minister (SAPM), Tariq Fatimi, SAPM, Zafar uddin Mahmood, Special Secretary Finance, Awais Manzur, Chairman National Electric Power Regulatory Authority (NEPRA), Tauseef. H. Farooqi.

Moreover, CEO/ CFO, Central Power Purchasing Agency-Guarantee (CPPA-G) Rehan Akhtar, CEO China Power Hub Generation Company, Ren Lihui, Executive Assistant to CEO China Hub, Li Hualin, CEO, PQEPC, Guo Guang lin, CEO, High-speed rail in China (HSR), Li Xin, VP HSR, Fan Jinde, Secretary PQEPC, Rong Hong Cheng and VP HSR, Li Hu.

The media outlet quoting sources said that Pakistani Finance Minister directed that monthly payments may be provided to Chinese Independent Power Producers (IPPs) to meet their operational cost and foreign exchange cover may be provided to the Chinese companies.

Chinese companies were given assurance that the issue of revolving account, pending for years will be resolved soon. The meeting decided that Finance Minister and Power Minister will talk to the PM regarding liquidity damages issues.

In addition, the sources said that Chinese companies complained that they are not getting positive response from NEPRA with respect to tariff adjustments as their cost have increased manifold.

Chinese companies have written several letters to power regulators in this regard which, according to them, remained unattended. These letters were also shared with the Chinese embassy. The meeting decided that Chinese companies would approach NEPRA and discuss tariff adjustment issues separately.

Chinese ambassador to Pakistan Nong Rong in a tweet wrote, “had a good discussions and in-depth exchanges with Chairman NEPRA. Committed to further explore the potential of cooperation in the power sector and promote high-quality development of CPEC.”However, official documents available with Business Recorder reveal that the issues discussed in the meeting with Prime Minister have not been resolved.

China Huaneng of Sahiwal Coal Power Plant in its letter of August 7 said that more than 0.5 million tons of South African coal is stored at the port, waiting for clearance because no funds have been paid to the coal supplier.

CEO, Port Qasim Electric Power Company (PQEPC), Guo Guangling, in a letter to Minister for Finance stated that due to SBP constraining the use of foreign exchange based on USD foreign reserves, the company as an imported coal project, had to postpone the settlement process between it and coal contractor which has a negative impact on the guarantee to consecutive coal supply.

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