Thursday June 30, 2022

$2.1 bn CPEC project to transmit 4,000MW electricity runs into snags

May 30, 2016

ISLAMABAD: The $2.1 billion mega project of erecting 878-kilometre long transmission line to transmit 4,000MW electricity from Sindh under CPEC initiative has run into snags as Chinese company that is to build this project has demanded from the National Transmission & Despatch Company (NTDC) the mammoth amount of Rs33 billion as annual revenue for 25 years and sought the full capacity charges even if less than 4,000MW electricity is dispatched a day.

“Yes, NTDC and the China Electric Power Equipment and Technology Company have locked horns over the said issues,” one of the general managers (GMs) of NTDC told The News.The top NTDC official said that it was not possible to ensure the annual revenue of whopping Rs33 billion for Chinese company as it was possible only in the range of Rs20-21 billion and on top of that the Chinese company was seeking full capacity charges against the dispatch of 4,000MW of electricity from day one when the transmission line would come on stream.

“We are in the process of persuading the Chinese officials arguing that the transmission of electricity will increase with the passage of time and will ultimately reach the 4,000MW level so NTDC will pay as per the volume of the electricity to be transmitted.”

However, he hoped that that sanity would prevail and both the sides would soon reach an agreement acceptable to both the parties as the completion of the said project was of national importance.

This is the country’s first ever huge project of 660KV High Voltage Direct Current (HVDC) electricity transmission line of the IPP mode as one of the CPEC projects would be constructed from Matiari to Lahore with the length of 878 kilometers to carry 4,000MW of electricity from south to mid country. The project will be commissioned with internal rate of return (IRR) of 17 percent.

Once all the grey issues get resolved and National Electric Power Regulatory Authority (Nepra) gives the tariff of the transmission line to be built in IPP mode will be constructed in 27 months after financial closure at the cost of $2.1 billion.

According to the official documents about the project available with The News, the cost of $2.1 billion include the 80 percent debt amounting to $1.680.30 billion and 20 percent equity that stands at $420 million. In case the project gets materialised with the said cost, the power consumers will have to pay additional Rs0.946 per unit in their billings that will also include Re0.435 per unit in the head of the debt servicing of the loan of $1.680 billion that is to be arranged from China EXIM bank.

Two converter stations at Matiari and Lahore, they said, would also be the part of the project to interface with the existing HVDC system in Pakistan. The project will be erected under BOOT (built, own, operate and transfer) basis by the private sector for 25 years time.

The line will transmit electricity to mid-country from the projects proposed to be set up in southern part of the country. The project will be handed over to NTDC after 25 years time.China Electric Power Equipment and Technology Company will build the transmission line under cooperation agreement with NTDC.

The said transmission line, as per the document, will transmit the electricity of the seven projects proposed in the southern part of Pakistan which include 330 MW to be generated by Engro Thar coal company under phase I at Thar, Sindh, 330 MW Engro Thar coal company under phase II at Thar, Sindh, 1320 MW SSRL, Thar coal, 1,320 Port Qasim Project, 660 MW Hub Power Company phase-I, Balochistan, 660 MW Hub Power Company phase-II, Balochistan, 330 MW Siddique Sons Energy at Port Qasim. The said seven projects will generate in toto 4,950 MW of electricity.

Under cooperation agreement, NTDC will take responsibility of O&M (operation and maintenance) of 878 kilometers 660 kv HVDC transmission line because of ongoing security situation in the country. With a view to remaining away from the conflict of interest, NTDC will incorporate the special purpose vehicle with name of NTDC O&M company and the said entity need $16.78 million for O&M which will be reflected in the tariff.

Under the head of lease of land, PPIB has also proposed the annual cost of $2.46 million, $108.67 million as interest during cost (IDC), $106.31 million in the head of Sindh infrastructure cess and customs duty as part of the total cost of the $2.1 billion of transmission line.