PAC demands briefing on CPEC power projects

Source: Express Tribune

Date: 2nd January 2019

Author: Shahbaz Rana


The Public Accounts Committee (PAC) on Tuesday decided to get a briefing on energy projects being setup under the China-Pakistan Economic Corridor (CPEC) after some members raised questions about high rate of returns given to Chinese investors and location of certain power plants.

The questions were mainly raised by members belonging to the Pakistan Tahreek-e-Insaf (PTI) and the Pakistan Peoples Party (PPP) during a briefing given by the Power Division. Later, PAC Chairman Shehbaz Sharif decided to get a comprehensive briefing from the Power Division.

Shehbaz also announced to setup two PAC sub-committees to look into the issues of overbilling by the power distribution companies and how to ensure generation of electricity from the cheap sources.

“Pakistan has offered very high rate of return in the range of 25% to 35% in dollar terms and the government of Pakistan guarantees are involved in these deals,” said the PTI’s Senator Shabbli Faraz.

A report by the Ministry of Planning revealed that during the next 20 years CPEC power projects related outflow would amount to $32 billion including debt repayments and repatriation of profits.

But the Power Division Secretary Irfan Ali told PAC that the internal rate of return of CPEC power projects is in the range of 17% to 25% due to different nature of input fuels of these plants.

It is the return on equity that in case of energy projects is as high as 34.2%, starting from 25%.  The PPP’s Naveed Qamar questioned the difference in rates of returns given to various power plants setup under CPEC.

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CPEC projects are in the IPP [independent power producer] mode and the Central Power Purchase Agency pay the investors through tariffs”, said Irfan Ali. “The power projects investors can repatriate their profits to China.”

The PPP’s Raja Pervaiz Ashraf questioned the rationale of setting up coal-based CPEC power plant in Sahiwal. “There is no valid reason for establishing the coal-based power plant far away from the seaport that is now a serious source of pollution and rising temperatures,” said the former PM.

The Pakistan Power Infrastructure Board managing director said the 1,320MW power plant was setup in Sahiwal to meet the energy needs of central Punjab. The PTI’s Brig (retd) Ijaz Ahmad Shah said it was a political decision to setup the power plant in Sahiwal.

The PTI MNA Riaz Fatyana, who belongs to this area, said due to Sahiwal power plant, the temperature in adjoining districts has started rising up. However, the Secretary Power argued that the supercritical technology has been used in Sahiwal power plant that addresses the pollution and environment degradation concerns. But Ashraf did not accept his explanation.

Karot hydropower plants want to go back due to problems they are facing. But the secretary power said he had not heard about this. PAC directed the Power Division to give a briefing on the CPEC related issues in light of concerns raised by the members.

The secretary power said the country’s installed electricity generation capacity has increased to 33,836MW but due to transmission constraints, only 21,000MW can be evacuated.

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“Some of the constraints will be addressed in next six months that will help to increase the supply to 24,000MW in June this year,” he added. He said after adjustments made, the total installed capacity under CPEC framework is 12,334MW with total investment of $25 billion. About 13 CPEC energy projects are under construction with an investment of $14 billion.

The PTI MNA Noor Alam Khan complained that during the past five years power projects were setup only in Punjab and Sindh while the other two provinces were completely ignored.

Shibli Faraz said that the RLNG-based power plants were being operated as ‘must run” plants, irrespective their efficiency factors. The secretary power said at the existing prices, the LNG-fired power plants were the third most expensive fuel after wind and solar. The LNG-based power plants are producing electricity at Rs14.28 per unit, wind Rs16.93 per unit and solar Rs19.86 per unit, he added.

The cheapest source of power generation is hydro that is providing electricity at Rs5.17 per unit, followed by Rs6.87 per unit by the captive power plants. He said the country faces load shedding due to transmission line constraints and increasing circular debt that surged to Rs755 billion in November.

The secretary informed the panel about the efforts being made to control electricity theft. PAC member Ijaz Shah said unions in power distribution companies are patronising the theft. He said he would resign as an MNA if the secretary power could transfer a particular powerful lineman.

The secretary said the government would introduce a new renewable energy policy next month aimed at enhancing the share of clean energy from only 5% to 30% of the total energy mix in next ten years.

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“The government plans to add 5,000MW to 10,000MW more electricity in the national grid from the clean energy sources. Dependency on the imported fuels could be harmful for the country,” he added.

PAC also expressed concerns over the policy of using $500 million Asian Development Bank loan for installing advanced smart meters in the efficient power distribution companies. It suggested installing these meters in companies like Hyderabad, Sukkur and Peshawar where line losses are the maximum.

PAC Chairman Shahbaz Sharif asked Ministry of Power Division to give an in-camera briefing on the Turkish ship-based energy firm, Karkey Karadeniz Elektrik Uretim (KKEU).  He asked the Auditor General of Pakistan to incorporate his input in the briefing whose date will be announced later.

The issue of Karkey project was raised by Raja Pervaiz Ashraf.  The KKEU, a Turkish power company entered into a Rental Services Contract for supply of 231.8 MW electric power for 60 months with GENCO IV on April 23, 2009, but the project was shelved.

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