Sino-Pak deal: Renewable energy deals with China under cloud

$6.5b worth of agreements hinge on price to be offered by Beijing investors.

ISLAMABAD: The future of $6.5 billion worth of renewable energy deals signed between China and Pakistan is hanging in the balance as Islamabad has linked the final agreement with the price offered by the Chinese investors.

Sources in the Alternative Energy Development Board told The Express Tribune that 2, 300 megawatts power project deals signed between Pakistan and China during the visit of Premier Wen Jiabao would only materialise if China offered competitive tariffs.

Both countries signed the Memorandum of Understanding (MoU) for 2000 MW wind and 300 MW solar energy generation.  After three months the Chinese investors will quote the prices at which they intend to sell the renewable energy, they added.

Pakistan wants to capitalise on renewable energy to meet the country’s growing power requirements, preserve the environment and encourage investment.

Pakistan and China signed 22 MoUs and agreements last week to enhance cooperation in the areas of energy, banking, security and technology.

An MoU has been signed for the development of wind and solar energy projects between the Three Gorges Corporation of China (CTGPC), and the Alternative Energy Development Board (AEDB), Ministry of Water and Power.

China plans to invest in the renewable energy sector in Pakistan by setting up wind and solar power plants in Punjab and Sindh.

The CWE would like to generate a total of 2300 MW of renewable energy in Pakistan.

1000 MW wind and 100 MW solar energy will be generated in Sindh, while 1000 MW wind and 200 MW solar energy will be produced in Punjab, over the next three years.

Officials at the AEDB state that power needs of the country are virtually unlimited and the sector is in a poor state as compared to other countries in the region.

“Even if we have foreign investors we will only be able to reach 20 per cent of the total requirement, the remaining 80 per cent still needs to be addressed,” the official added.

China is making the entire investment and while Pakistan will not be sharing the cost, it is concerned about the affordability of the projects for which negotiations are underway.

If the final price is not affordable then the agreement will not be signed. The officials are hopeful the deal will be mutually beneficial as Pakistan’s power needs are soaring.

CTGPC, a state-owned enterprise, constructed the Three Gorges Dam and owns and operates it as well as other large hydropower projects in China and abroad.

CTGPC is also visible in Pakistan, represented by its subsidiary,  China International Water and Electric Corporation (CWE).

The CTGPC and CWE are also interested in developing the first tower manufacturing workshop that will be operational in 2011 by creating tower, blade manufacturing facilities and even the turbine assembly and manufacturing factory in Pakistan.

Other investments in the energy sector include the Pak-China Investment Company (PCICL), a joint venture between Government of Pakistan.

The China Development Bank has informed the Ministry of Water and Power, of its interest in being an equity partner in this $120 million project and a separate MOU is expected to be signed between the PCICL, China Development, Bank and CWE.

Published in The Express Tribune, December 24^th, 2010.