Stop-gap: World’s leading banks willing to fund coal-run power plants

Published: September 24, 2013

According to a study conducted by the Ministry of Water and Power, the economy can save around $26 billion in fuel costs over the next 15 years if thermal plants of only 420MW are shifted to coal. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: A consortium of leading international banks including the Asian Development Bank (ADB) is willing to provide Pakistan $1.82 billion for two coal-fired power plants to be installed in Jamshoro with production capacity of 660 megawatts each.

The coal-powered plants are being set up as part of a plan to generate 9,800MW of electricity through coal in an effort to control the re-emerging inter-corporate debt and bring down production cost.

According to sources, the government has completed feasibility study on the two power plants with ADB assistance, estimating total cost at $2.588 billion. Of that, the ADB has shown willingness to provide $900 million, the Islamic Development Bank $440 million and Exim Bank of China $480 million.

The government has decided to press on with discussing the financing with these international banks. It will inject the remaining $768 million as equity into the power projects, said officials of the water and power ministry.

The Planning Commission has given the go-ahead for the plants and now their PC-1 will be submitted to the commission for clearance from the Central Development Working Party (CDWP) and approval from the Executive Committee of the National Economic Council (Ecnec). The projects are expected to be completed by 2016.

According to ministry officials, the plants will be operated through 80% imported coal and 20% local coal from Thar.

The government is pushing ahead with a plan to produce electricity on a massive scale with the help of coal-fired power projects in an attempt to tackle shortages, improve generation and control the re-emerging inter-corporate debt. Under this plan, 9,800MW of coal-based power plants will be built in three years.

To produce that much electricity, three existing independent power plants (IPPs) of 2,590MW capacity will be shifted to coal to bring down the generation cost. These include 400MW Guddu, 840MW Jamshoro and 1,350MW Muzaffargarh plants.

Work on new coal-run power plants will also be undertaken and they will be capable of generating 7,210MW of electricity. These include two plants of 600MW each in Balochistan’s coastal area of Hub, 2,400MW Thar projects, 1,200MW Karachi Coastal project, 1,200MW Lakhra project and 1,320MW Jamshoro projects.

The shift to coal is aimed at avoiding the debt build-up in future and providing cheap electricity to consumers. The debt has plagued the entire energy chain, forcing the government to spend billions of rupees every month to prop up the energy system.

According to a study conducted by the Ministry of Water and Power, the economy can save around $26 billion in fuel costs over the next 15 years if thermal plants of only 420MW are shifted to coal.

About 68% of the country’s power production comes from oil and gas. Though gas is a cheaper fuel, it is getting increasingly scarce, meaning plants that have the capacity to run both on oil and gas are forced to rely on furnace oil. This, however, more than doubles the cost of electricity production.

Published in The Express Tribune, September 24th, 2013.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

on Twitter, become a fan on Facebook

Reader Comments (6)

  • Ishrat salim
    Sep 24, 2013 - 2:37AM

    Good move…better late than never, but will the oil mafia allow this project off take ? We are our own enemy, we do not need external enemy, otherwise, such project would have been executed longtime ago….not one govt for the past 66 years been sincere with this country of ours….so how can we believe that this time things will be ok, yet we can only keep our fingers crossed and pray for Allah swt help and support….

    Recommend

  • Sep 24, 2013 - 8:07AM

    Why so late, if government can save upto $1.73b/yr on 1 thermal plant converted to coal of 425Mw; mean of that sum, we can install 425Mw new plant every year!!!
    I’ve been hearing so long about 2 installed plants of Jamshoro to be converted to coal and additional 2 coal run plants to be installed, hence the NEWs is not NEW for Me and of course for all!
    Let’s see when CWDP and ECNEC approves the project, and that will be NEW NEWs.
    The project shall decrease electricity theft because Electricity Theft is Directly Proportional to the Electricity Costs and such project shall surely decrease electricity theft, I guess!

    Recommend

  • Truth_Prevails
    Sep 24, 2013 - 9:21AM

    80% IMPORTED Coal. Come on!!!! I thought we had one of the biggest reserves of coal!

    Recommend

  • adnan
    Sep 24, 2013 - 12:22PM

    local coal is of low quality.whole cement sector is using imported coal to produce electricity

    Recommend

  • sgrr
    Sep 24, 2013 - 11:47PM

    Whether Jamshoro, Guddu and Muzaffar Garh are IPPs? Can anyone reply.

    Recommend

  • unbelievable
    Sep 25, 2013 - 6:58AM

    @Truth_Prevails:

    80% IMPORTED Coal. Come on!!!! I
    thought we had one of the biggest
    reserves of coal!

    Thar Coal is overrated – most of it’s underneath lots of water making it uneconomical to mine – the coal that is reachable is of poor quality which makes the coal suitable for mine mouth power plants (ie BTU’s it takes to transport the coal long distances almost outweigh the BTU’s generated by burning the coal). Major international lenders restrict use of Thar Coal knowing it make no economic sense.

    Recommend

More in Business