Pakistan to urge Chinese IPPs to switch to domestic coal

ISLAMABAD: Pakistan this month will ask Chinese independent power producers (IPPs) operating in the country to shift to using coal from Thar region rather than imported coal, the power minister said on Sunday.

Islamabad may also begin talks on re-profiling Pakistan’s energy sector debt during the visit to Beijing, Awais Leghari, head of the energy ministry’s Power Division, told Reuters.

Leghari will be part of the delegation to discuss structural reforms to the power sector suggested by the International Monetary Fund (IMF), which last week agreed on a $7 billion bailout for the heavily indebted South Asian nation.

Neighbouring China has set up over $20 billion worth of energy projects in Pakistan.

“One of the key purposes of going along is the conversion of our imported coal units to the local coal. That would have a huge impact on the cost of energy, of power in the near future. So that is one of the biggest (items on the) agenda,” Leghari said in an interview.

Such a transition would benefit the Chinese-owned IPPs in Pakistan by reducing pressure on Islamabad’s foreign exchange reserves, he said, making it easier to repatriate dividends and offering a better return in dollar terms.

The transition could save Pakistan more than Rs200 billion ($700 million) a year in imports, translating to a decrease of as much as Rs2.5 per unit in the price of electricity, Leghari said.

In April a subsidiary of conglomerate Engro agreed to sell all of its thermal assets, including Pakistan’s leading coal producer, Sindh Engro Coal Mining to Pakistan’s Liberty Power. Liberty said the decision stemmed from Pakistan’s foreign exchange crunch and its indigenous coal reserve potential.

The minister declined to elaborate on the possible talks with China over re-profiling energy debt.

Pakistan’s power sector has been plagued by high rates of power theft and distribution losses, resulting in accumulating debt across the production chain – a concern raised by the IMF.

The government is implementing structural reforms to reduce “circular debt” – public liabilities that build up in the power sector due to subsidies and unpaid bills – by 100 billion Pakistani rupees ($360 million) a year, Leghari said.