GE says circular debt antagonises power generation

KARACHI: US multinational conglomerate General Electric on Friday fretted over growing circular debt in Pakistan’s energy sector that it said hamstrings power producers’ ability to ensure reliable supply and get reasonable returns on investment.

Michael Keroulle, chief executive officer of GE Steam Power business in the Middle East, North Africa and Turkey told the News that the country’s energy sector has been strained with inter-corporate circular debt, which also bothers international companies like General Electric.

“We are worried about the circular debt,” Keroulle said during a visit. “This liquidity crunch impacts investment and expansion in the sector.”

Latest estimates said energy sector’s inter-corporate debt has swelled to around Rs800 billion, causing severe cash-flow issues for the power producers.

GE provides a lot of services to independent power producers. GE was the first one to bring the super critical technology and the first to bring ultra super critical technology.

“What we are seeing more and more often is the circular debt results in inability of power producers to pay in US dollars; therefore our ability to deliver reliable services in Pakistan is also contained,” Keroulle.

Hopefully, the situation would improve with the government making negotiations with the international financial institutions, he added.

The GE’s executive said indigenous lignite, which was lying abandoned since long, started generating electricity, which would save valuable foreign exchange as Pakistan would not have to buy expensive fuel.

“GE is demonstrating that local lignite can be used in generating power. All this goes in the sense of lowering the cost of electricity, reducing the use of foreign currency, enabling the country to use its foreign currency for right import,” he said. “Most importantly, this is not being done on the detriment to the environment.”

On renewable energy, Keroulle said it is not dependable power and not economical as compared to the thermal power.

“If we talk about reality, the coal or gas-based power costs around 5 cents/kWh (kilowatt-hour), while the renewable goes up to 20 cents/kWh.”

Keroulle said renewable in the US cost around $200 billion of subsidies, while deployment of renewable in Germany is costing around $25 billion in subsidies a year.

“As a group we believe in renewable,” he added. “A country like Pakistan cannot afford to subsidise the energy costs four times higher. If you can generate power 5 cents/kWh, you should do that.” GE’s official said the economy could not progress without cheap and reliable electric power.

For renewable energy to really work, a country needs to have a very good base load installed capacity as well as really flexible capacity. Otherwise there would be power outages, industry would suffer and country would become less competitive.

“A lot of western media and NGOs are trying to antagonise the steam power generation and coal power generation, but we see a partnership between thermal and renewable as these complement each other,” Keroulle added.

Sacha Parneix, a general manager of GE said coal power plants of cumulative installed capacity of six gigawatts

are either in operation or under construction, of which GE is implementing 3.3GW.

“Generation on imported coal is cheaper than gas or furnace oil and it would relieve balance of payment,” Parneix said.

“Pakistan has enormous coal reserves enough to power 100GW for 300 years, which could change the future of Pakistan’s economy.”

Parneix said GE has developed air-cooling technology considering water constraints in Pakistan.

“Though the efficiency levels of air-cooled plants are marginally lower than the water cooled plants there is hardly any difference in overall costs.”