Jamshoro coal power plant: Work yet to begin as project delay enters third year

ADB report says construction is not likely to start until first quarter of 2017

ISLAMABAD:

The government’s plan to produce 1,320 megawatts of electricity from the $1.5 billion Jamshoro coal-fired power plant by the end of 2018 has faced a setback, as even two years after arranging loans from international lending agencies it could not begin construction activities.

“As of January 2016, no construction, rehabilitation or remediation activities had commenced on the site and none is envisaged to commence until the first quarter of 2017,” said a latest report of the Asian Development Bank (ADB) - the lead lender of the project.



The report added since no activity on the ground took place, an environmental monitoring programme had not been developed yet for the project.

The financial progress on the much-trumpeted project is also almost nil, as against the $900 million ADB loan, actual disbursements in the last two years stood at less than $6 million or 0.7% of the total, showed official documents of the Ministry of Finance and Economic Affairs.

Project timeline

Almost negligible progress on financial and civil works means that the government would miss its December 2018 deadline to complete the project. The project had been originally conceived by the Pakistan Peoples Party government and a loan agreement was signed during first year of the PML-N government.

In February 2014, Pakistan signed the loan agreement amounting to $900 million with the ADB, terming it a big step towards achieving the goal of increasing the share of coal in power generation.

However, the loan became effective in November 2014; 11 months after the ADB board approved it. Since then, the country is paying 0.15% of the total amount in commitment charges.

Pakistan has acquired the loan for 25 years at an interest rate of London Interbank Offered Rate (Libor) plus 0.8%. The signing ceremony had been held in the Prime Minister’s Office, indicating the importance that the government had given to the project.

The Jamshoro power generation project is aimed at increasing the capacity of the Jamshoro Thermal Power Station by installing two 600MW supercritical coal-fired units. Eighty per cent of the coal will be imported.

Significance

Jamshoro power plants are an important part of the government’s plan to increase the share of coal-based power generation to 24% of the total fuel mix by 2019. This is to be achieved by reducing the share of oil-based power generation from 38% to 14%.

The project is also important to the government’s mid-term planning to end load-shedding in the country.

The Islamic Development Bank will also provide $220 million for the project. Initially, the IDB had offered $150 million. The total estimated project cost of $1.5 billion may also go up due to the delay in its completion, said sources.

The Ministry of Water and Power and the ADB did not comment on the news report.

ADB’s discontent

In the last country portfolio review, the ADB had noted that the “implementation progress on the Jamshoro generation project is very slow”. The energy sector is the single largest sector in terms of ADB investment, comprising 55% of the ADB portfolio of $5.6 billion.

At the time of approval of the loan, the ADB had boasted that new coal-fired plants would generate electricity at a lower cost, saving about $535 million per year in fuel imports compared to oil-fired power plants.

One of the many points of contention for the ADB was how the Ministry of Water and Power wasted significant time in finalising the bid documents. According to the ADB, it was as late as February 1 when the Jamshoro Power Company Limited (JPCL) invited sealed bids from eligible bidders for site remediation work and the process of submission would continue till March 25.



There are also delays in the development of coal receiving facility at Port Qasim. Besides, financing for a scheme of coal transportation by rail from the terminal to the project site has yet to be secured.

Last week, the Central Development Working Party cleared the project for coal transportation without any allocation in the current fiscal year’s Public Sector Development Programme.

Published in The Express Tribune, February 16^th, 2016.

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