Pakistan likely to turn down Japan’s offer to finance new Lakhra power plant

ISLAMABAD: Pakistan may decline Japan’s offer to finance a new 650-megawatt supercritical coal-fired power plant at Lakhra to replace an out-dated 150MW unit due to the preoccupation of Pakistan Railways with the China-Pakistan Economic Corridor (CPEC) projects and higher power generation cost.

Japan is keen to provide a loan of $1.7 billion for construction of the new power plant at Lakhra. The loan is linked with the purchase of machinery and plant from Japanese vendors.



The government on Friday reviewed Japan’s offer during a meeting chaired by Finance Minister Ishaq Dar. Senior officials of the Ministry of Finance, Ministry of Water and Power, Pakistan Railways and Economic Affairs Division (EAD) participated in the meeting.

Dar did not take a final decision on whether to accept or reject the offer and another meeting would be held early next week, government officials said. Pakistan would give a formal response after holding the next meeting, they said.

Dar convened the meeting of stakeholders following Japanese ambassador’s talk with him, who expressed the desire to fund the Lakhra power plant, according to officials of the Ministry of Water and Power.

Tokyo is keen to invest in the project and the Japan International Cooperation Agency (JICA) has already completed a feasibility study for installation of the plant.



Sources said officials of the Pakistan Railways, EAD and Ministry of Water and Power did not support the proposal to set up a supercritical coal-fired power plant. The officials of the Ministry of Railways did not give a firm commitment to providing logistical support for transporting coal to the site.

The Pakistan Railways is already preoccupied with the CPEC projects and sparing freight wagons for coal supply to yet another power project is not immediately possible.

Another reason for opposing the project was the expected high cost of power generation when compared with the Asian Development Bank (ADB)-funded Jamshoro coal-fired power plant, said the officials.

The site of the project, which was less than 40 kilometres from the Jamshoro power plant, was another reason for opposing the new project.

The existing Lakhra power plant has a generation capacity of 150MW but the output is very low due to the out-dated technology and high cost of generation. The project was also on the active list of privatisation.

Last year, financial advisers did not come forward after the Privatisation Commission sought expressions of interest.



This project had also remained in the news for all the bad reasons and the Supreme Court struck down the plant’s lease deal, which the Pervez Musharraf-led government signed in 2006 for 20 years without open bidding.

The government’s reluctance to accept Japan’s offer came amid reports that the Ministry of Water and Power had decided to stop issuing fresh Letters of Intent and Letters of Support for imported fuel-based power plants to be set up by the private sector.

According to media reports, the ministry informed the Private Power and Infrastructure Board that new 2,632MW hydroelectric power plants, 3,960MW coal-based power plants (both local and imported) and other renewable energy projects already under construction will bring 13,207MW of new generation capacity by the end of 2018.

According to a statement issued by the finance ministry after the meeting, Dar reviewed the financial aspects of coal-based power projects and expressed his satisfaction over the progress.

He said every effort must be made to complete the projects within the approved timeframe as well as within the approved budgets.

Published in The Express Tribune, July 30^th, 2016.

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