Fearing dollar flight, govt looks for Chinese financing

Move may delay power generation projects by 12 to 18 months


Zafar Bhutta April 20, 2016
PHOTO: REUTERS

ISLAMABAD:


The federal government has asked coal-based power producers to arrange financing from China instead of domestic institutions and markets in an attempt to prevent the outflow of dollars for the purchase of equipment, officials say.


However, it is feared that this government move will delay the completion of power projects by 12 to 18 months.

Pakistan's journey from $6b to over $15b

It must be kept in view that several coal-power projects are facing default on debt repayment in the United States and other countries in the wake of refusal by banks to provide financing. Environmental concerns are among the major reasons behind the reluctance of banks to fund the projects.

Talking to media, a senior US official revealed that it had been established that many premature deaths of children around the world had been caused by environmental hazards and therefore some countries were switching from coal to other sources of power generation.

China is the only country that could extend loans for the coal-power projects and reports suggest that it also wants to shift some abandoned old coal plants to Pakistan.

According to officials aware of the development, the Ministry of Finance has asked new coal-based power producers, who have so far been unable to raise funds for their projects, to scout for Chinese financing.

The case of currency fluctuation

“This way the government will be able to stave off pressure on the country’s dollar reserves,” an official commented.

Meanwhile, the Ministry of Water and Power has recommended to the energy committee of cabinet that it should block the announcement of new tariffs for the power projects based on imported coal except for the plants being set up under the China-Pakistan Economic Corridor (CPEC), the projects of Lucky, Siddiqsons and others for which letters of support have been issued and the projects being shifted from furnace oil to coal with estimated capacity of around 4,920 megawatts.

The Lucky and Siddiqsons’ projects are in the pipeline and they have been told to look for Chinese loans.

According to the officials, Siddiqsons is lobbying the government to include its project in the CPEC’s priority list, but this may hurt some other schemes. However, they believe the project may be made part of the economic corridor programme.

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The government has already placed the Thar coal project, sponsored by Engro Corporation, in the CPEC’s priority list to ensure state guarantee and financing from China.

Published in The Express Tribune, April 21st,  2016.

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COMMENTS (13)

khan | 5 years ago | Reply @Woz ahmed: it is three times the cost with no base power load otherwise no obdy would hav ebeen building nuclear, coal, oil or even coal plants india is biggest coal user , producer and adding faster in coal mines than any other country, it is also going to become the world biggest ccoal importer after investing in austrialia
Chacha Jee | 5 years ago | Reply The main concern for a lender is the borrower' ability and willingness to pay back with interest. In Pakistan people do not pay their electric bills and are well known for stealing electricity. It was difficult for lenders to lend money. For International lenders, Pakistan is in dangerous neighborhood. How will they come for inspection in Pakistan.
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