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Islamabad [Pakistan]March 6 (ANI): Chinese companies engaged in power projects initiated by the China-Pakistan Economic Corridor (CPEC) are facing financial difficulties despite repeated assurances from the Prime Minister, Pakistan Business Records reported.
Chinese companies have raised this issue in all forums through the Pakistani embassy in Beijing and the Pakistani embassy in Islamabad. Chinese insurer M/s Sinosure is also reluctant to insure new financing for power sector projects due to failure to meet contractual obligations of companies with established projects, the report said.
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According to official documents provided by Business Recorder, Sindh Engro Coal Mining Company (SECMC) has informed Power Division that its mining operations have been severely affected due to significant delays in the issuance of letters of credit (L/C) and overseas remittances.
SECMC also incurs demurrage, liquidated damages and penalties for delayed approvals, which also results in reputational damage as well as additional costs. According to the Business Recorder, SECMC has been engaging with the banks, but there are still a large number of outstanding matters.
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“Our O&M contractors have now indicated that they are unable to continue mine operations due to significant delays in their payments. We ask for your immediate intervention to support remittances to our Chinese O&M contractors; otherwise, mine operations will cease immediately,” Business The Recorder quoted SECMC chief executive Amir Iqbal as saying in a letter to Secretary Power.
Closing operations at the mine will result in the closure of four power plants operating on Thar coal, namely Engro Power Thar Limited (EPTL 660 MW), Thar Energy Limited (300 MW), Thal Nova Power Thar(Pvt.) Limited (330 MW ) and Lucky Electric Power Co (660 MW). He added that running the equivalent generation capacity on imported coal would impose an additional foreign currency burden on the economy of $85 million per month and would also result in a tripling of the cost of electricity generation.
Port Qasim Electric Power (Pvt.) Co (PQEPC) has notified the government of the imminent shutdown of two of its 1,320 MW units due to GoP default.
The Indo-Pacific Strategic Communications Center (IPSCS) recently reported that the experience of Chinese companies working on the ground in Pakistan has been far from pleasant. Most of the early investments in CPEC were in the power sector. However, these investments create considerable liabilities on the future cash flows of these projects.
According to the IPSCS report, most of the deals signed between Chinese companies and Pakistan require the Chinese companies to ensure that the rate of return on investment is too high. Having lived through an economic crisis for the better part of the past five years, Pakistan never seemed willing to meet those debts with timely payments. (Arnie)
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)
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