Study on Gwadar power project: Chinese firm seeks approval of additional cost

Chinese company, CIHC Pak Power Company (Pvt) Limited has sought approval of additional cost on study for conversion of 330-MW Gwadar Port power project from imported coal to Thar coal.

In a letter to Managing Director PPIB, Shah Jahan Mirza, company Chairman Zhao Bo has cited the reference to the Meeting Minutes duly issued by PPIB on September 28, 2022 and on July 15, 2022.

The power firm, on urging of PPIB, to switch the project from imported South African coal to local Thar coal, engaged a power design institute to formulate a proposal for the initial analysis and shared a brief report on Thar coal blending with PPIB.

According to the Chinese company, in initial study, the design institute has suggested that local Thar coal is not feasible and company may blend 20 per cent Thar coal with 80 per cent imported South African coal, and even so the Company may redesign the plant but it is unaffordable to resolve the issue of frangibility, fast weathering, self-ignite, high water content and other adverse characters of Thar coal under current existing conditions.

The company contended that obviously cost disadvantage of Thar coal for not mining mouth plant is clear-cut compared to imported coal cost in the long run, if NEPRA accepts all the relevant coal cost will be passed through in tariffs but the exceeding part of the cost between imported coal and Thar coal will be on the end-consumers’ shoulders.

The company maintains that shifting from Thar coal to imported coal will be basically impossible after the plant construction, as is in the case of imported coal IPPs in operation nowadays being required to shift fuel from imported coal to Thar coal.

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“It should be considered that whether it is worth to give up opportunity cost and whether it will contribute to the positive trend of foreign exchange reserves under the comparative advantage principle in reality since government required the Company to utilize a possible much higher cost resource in future,” the CEO of the company questioned.

However, the Company has shown its intent to conduct further study on the Thar coal economic and technical feasibly analysis as per the requirement raised by PPIB in view of the low foreign exchange reserve situation of the government.

During meeting on September 15, the company requested PPIB to provide necessary available information to it, i.e., coal transportation studies (existing transportation & newly planned transportation system, details of proposed railway project from Thar to Chor (105-Km), and work jointly in order to complete the study on fast track.

The company has conveyed that it would submit study for PPIB’s estimation and approval so that the Company may change the design and apply for the modification on environment NOC, tariff determination, generation licence, IA & PPA and other related consents in Pakistan and China.

In view of strategic importance of this project, the Company has spent more than $22 million for project development in order to avoid further increasing the development cost of the project, and suggested both parties should concentrate their time on researching the feasibility of Thar coal transportation at the first phase and then carry out/ revise the feasibility study of the power plant on Thar coal as fuel after transportation proposal becomes feasible.

The company has also requested the PPIB that expenses incurred on studies and other auxiliary costs shall be considered and approved by NEPRA in the tariff.

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