Tariff revision poses threat to solar power project

Published: November 11, 2015
Chinese investors seek intervention of Punjab chief minister. PHOTO: AFP

Chinese investors seek intervention of Punjab chief minister. PHOTO: AFP

ISLAMABAD: Zonergy Company Limited, a Chinese concern working on a 900-megawatt solar power project, has warned that a revision in the agreed upfront tariff will pose a serious threat and jeopardise the spirit of cooperation under the China-Pakistan Economic Corridor (CPEC) programme.

Upset over the move by the National Electric Power Regulatory Authority (Nepra) to push the tariff down from 14.15 cents to 9.25 cents per unit from January 2016, Zonergy President Yu Yong has sent a letter to Punjab Chief Minister Shahbaz Sharif.

‘Punjab’s environment is conducive for solar power’

In the letter, he recalled that the company’s interest in setting up the solar power plant dated back to August 2013 when the first memorandum of understanding (MoU) was signed. The Punjab government and Zonergy signed another MoU on July 9, 2014 in Beijing for installation of the 900MW plant in Bahawalpur under the Quaid-e-Azam Solar Park project.

This was followed by a project commitment agreement on July 23, 2014 and both sides agreed on a tariff of 14 cents per unit excluding taxes and also reached agreement on associated conditions and the project implementation schedule.

This tariff, he claimed, was quite below the prevailing market standard as Nepra’s tariff at that time was 16.2 cents per unit, but the company accepted it in view of the economies of scale of the project.

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“During our informal discussion with members of a Pakistani delegation that recently visited Beijing, we learnt that the 14.15 cents per unit tariff will apply only to the initial 300MW solar plant and there is reportedly a move to revise the tariff for the second and third plants of 300MW each,” he said. “This proposed revision is a serious threat to the project.”

Zonergy has already invested heavily in the engineering design and got commitments from various institutions and manufacturers for financing and equipment procurement.

The company president stressed that the proposed revision jeopardised the viability of the project as Chinese financial institutions had already noted that the tariff of 14.15 cents was even lower than the prevalent tariff in the Chinese market.

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“We request that the agreements and contracts signed by the two sides should be honoured and implemented,” he said. “Since special purpose companies, each assigned the development of a 100MW plant, have been registered, the upfront tariff shall remain applicable for the entire 900MW plant at 14.15 cents per unit.”

Published in The Express Tribune, November 11th, 2015.

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Reader Comments (6)

  • Fakhar Iqbal
    Nov 11, 2015 - 9:47AM

    Believe it or not – this is being done by Nawaz Sharif to keep Saudi oil in demand. We keep forgetting Nawaz is admittedly a Saudi man in Pakistan. Recommend

  • Woz Ahmed
    Nov 11, 2015 - 10:31AM

    Last week an American company bid to supply solar in India at 7.2 cents, our tariff of 9.25c is 28% higher , yet the Chinese want more,

    Let us not forget this is under CPEC no international competitive bidding, sovereign guarantees and ‘subsidised’ Chinese finance.

    I hope NEPRA can stand firm, but I doubt it.Recommend

  • Saad
    Nov 11, 2015 - 11:08AM

    The Chinese will squeeze out every paisa they can from Pakistan.Recommend

  • Ashraf P
    Nov 11, 2015 - 11:12AM

    It should not cost over Rs.8-9 per unit.Recommend

  • SuperNeo
    Nov 11, 2015 - 11:24AM

    Pakistan can’t say no China even tariff get increased to $100
    After all its their Recommend

  • Hamza
    Nov 11, 2015 - 5:16PM

    Really now, people keep on saying India this India that but they fail to realise that India’s financial market is more ‘advanced/stable’ when compared to Pakistan’s.
    The company I am currently working for had a few solar projects in different locations around the world and we, along with over 50 other firms, were actively considering setting up plants in Pakistan. However due to the rash nature of Pakistan’s politics along with NEPRA’s decision to change the tariff to completely unrealistic levels has deterred majority of the investors.

    On a personal note, I wish all you haters a very happy time enjoying your load sheddingRecommend

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