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China’s huge investment in coal-based power generation projects

Published on 12th Oct, Edition 41, 2015

 

The landmark economic package of China is a depiction of the confidence of China and Pakistan and the deep love for a large number of people of Pakistan.

The projects are part of a broad bilateral deal called as China-Pakistan Economic Corridor (CPEC) under which the Chinese government and banks will finance Chinese companies to invest $45.6 billion worth of energy and infrastructure projects in Pakistan over the next six years.

Pakistan faces a year-round electricity crisis, which rises to over 6,000 megawatts in summer. The government is planning to meet the shortfall by building coal-fired power plants with the help of foreign investment, especially from China. The government had decided to go for coal-based power generation with the support of China as this is a cheaper source of energy compared to oil.

Sahiwal project

Two coal power projects of 660 megawatt each are being set up in Sahiwal and a total of 1320 megawatt electricity will be generated from these projects. The plant will bring $1.6 billion dollar foreign investment from two Chinese companies — China Huaneng and Shandong Ruyi Group. The project is expected to complete in two years.

The initial design of Sahiwal coal power project has been prepared and all matters relating to transportation of coal from Karachi to Sahiwal have been settled with Railways authorities. The project will be implemented transparently by ensuring high speed and quality. The Punjab government has decided to impart training to Pakistani youth in thermal engineering sector in China.

This power plant is the biggest and first-ever project of power generation with coal in Pakistan and Chinese companies have made investment in this project.

It is an important project of China-Pakistan Economic Corridor. Sahiwal Coal Power Project will play an important role in removing darkness from the country with the help of China. It will boost Pak-China friendship and will further strengthen economic and trade relations between the two countries. The Project is of vital national importance and work is being carried out expeditiously on this 1,320 megawatts project. Most modern super critical power plants are being installed in Sahiwal, which are environment-friendly and meet the environmental standards.

China’s huge investment in Pakistan is not merely an investment but a gift for Pakistan, which Pakistani people can never forget. Sahiwal Coal Power Project is the first drop of rain with regard to CPEC and will result in generation of much-needed electricity and elimination of darkness.

Pakistanis, facing electricity shortfall over the last decade will definitely get a huge sigh of relief when power projects, being launched with the help of friendly neighboring country China, yield maximum profit in the near future.

At a time when China is under massive international scrutiny for its coal-fired power projects and subsequent greenhouse gas emissions, China is investing billions of dollars in Pakistan’s coal power projects.

Thar and Karachi project

Chinese banks and state-run companies like Power Construction Corp of China Ltd will finance two separate coal-fired power projects in Pakistan – 660 megawatts Thar coal project and 1,320 megawatts projects near Pakistan’s port city Karachi – worth US$4.15 billion.

The 660 megawatts Thar coal power project will cost $2.05 billion that is being undertaken by a Pakistani private company, Engro Powergen, with help of the Sindh provincial government and financing from Chinese banks. It will be run on indigenous resources of coal. The project has been divided into two parts – coal mining and power generation. The mining will cost $950 million while $1.1 billion will be required for power generation for the 660 megawatts coal-fired power project.

China will give $200 million out of $950 million for the mining and it will finance $625 million out of $1.1 billion for the power generation. The remaining amount will be raised through Pakistanis banks with help of Sindh provincial government. The project will be completed by second quarter of 2018.

 

State-run Power Construction Corp of China Ltd plans to invest in a $2.1 billion coal-fired power project in Pakistan as part of a broad economic cooperation between China and Pakistan. It will get a 51 percent stake in the project near Karachi, while Qatar’s Al Mirqab Capital will own the remaining 49 percent. The Chinese company will be responsible for construction and operation of the project, which is scheduled to be completed within 32 months and will mainly use coal from Indonesia.

The project, including the installation of two 660-megawatt high-efficiency power units known as super critical generators, will be part of a broad bilateral deal dubbed as China-Pakistan Economic Corridor, Power Construction. The coal-fired power project will require a total investment of $2.085 billion, nearly $1.6 billion of which will be funded with loans.

A project at Hub

Hub Power Company (Hubco) signed a joint venture agreement with China Power International Holding Limited (CPIH), a wholly-owned core enterprise of China Power Investment Corporation (CPIC), to develop a $2.4 billion coal-fired power project.

Hubco and the CPIH will develop an imported coal-fired power plant, based on the upfront tariff announced by the Government of Pakistan, along with an ancillary coal jetty at the company’s existing site at Hub, Balochistan. The cost of the project is approximately $2.4 billion, with debt to equity ratio of 80:20. This project would contribute towards alleviating the current energy crisis prevalent in Pakistan.

Feasibility study, along with the field investigation and geo-technical investigation for plant and the jetty has been carried out. This is the first time field investigation and geo-technical Investigation have been carried out for the Hub area. Environmental and Social Impact Assessment (ESIA) for the plant and the jetty is also being conducted.

The Hub site has many Brownfield advantages – secured and fenced land, existing infrastructure (roads, colony etc), access to Arabian Sea for direct import of coal, existing helipad, etc – making it an ideal location for power plant development. The coal-based Brownfield project at Hub is being developed on a fast-track basis.

Hubco is the country’s first and the largest Independent Power Producer (IPP) and stands as one of the most efficient thermal power plants in the country. Hubco is also the first IPP to go into expansion and has set up the country’s first hydel IPP. With the combined power generation capacity of over 1,600MW, the company and its subsidiary provide approximately 10 percent of the country’s electricity demand. The coal-based plant will be established with state-of-the-art technology to stringently follow standards set by National Environmental Quality Standards.

From the China-Pakistan Economic Corridor package of $43 billion, $33 billion is Chinese investment for energy projects. The $43 billion economic package by China includes $33 billion for coal, solar, hydro and other projects of power generation through alternative sources.

Under the deal, the Chinese government and banks will finance Chinese companies to build $45.6 billion worth of energy and infrastructure projects in Pakistan over the next six years.

The deal further develop ties between Pakistan and China at a time when Pakistan is fearing about declining US support as troops pull out of Afghanistan.

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