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News Headlines for the month of
AUGUST 2016

KP PA SPEAKER INAUGURATES SOLAR TUBE-WELL IN SWABI

Speaker, KP Assembly, Asad Qaiser has inaugurated solar irrigation tube-well at Munara, district Swabi and announced the installation of solar lights and hand-pumps in the district. Addressing a public meeting after the inaugural ceremony, the Speaker KP Assembly said that district Swabi has got the slot of Speaker for first time in the history of the province and in that capacity he will render such services for the people that will be remembered for long. He said that the purpose of initiating projects in education, health, communications, agriculture, irrigation, and sports sectors in the district beside provision of modern facilities was the socio-economic uplift of the people. The Speaker KP Assembly said that the matter of the committing of injustices with the people of district Swabi in Ghazi Brotha Project will take taken up in the National Assembly and vowed to fulfil all electoral commitments with the people.

Copyright Business Recorder, 2016

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DASU HYDEL PROJECT TO ENHANCE POWER PRODUCTION: COMMISSIONER

Commissioner Hazara Division Muhammad Akbar Khan has said that the completion of Dasu Hydro Power Project will enhance the power production to a great extent in Khyber Pakhtunkhwa as well as in the country. He said Dasu Hydro Power Project would play a pivotal role in the progress and prosperity of the country. He expressed these views, while addressing a function on the occasion of inking an agreement between Provincial Government and Wapda for acquiring land for Dasu Hydro Power Project. Deputy Commissioner Kohistan and High officials of Wapda were also present on the occasion. The Commissioner Hazara Division said that the agreement would be helpful in the work of acquisition of land. Dasu Hydro Power Project is a big national project which, if completed as early as possible would enhance the power production at district of Kohistan, Khyber Pakhtunkhwa as well as in the whole country. He said the project would be helpful in moving the province as well as the country ahead on the way of progress. The Commissioner Hazara Division directed M.D Dasu Hydro Power Project to include the schemes of welfare and development of the poor people of district Kohistan in the project. G.M Dasu Hydro Power Project assured the commissioner that the schemes for the development and welfare of the people of district Kohistan have already been included in this project like the schemes of Health, Education and clean drinking water.

Copyright Business Recorder, 2016

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SOUTH KOREAN COMPANY TO SET UP SOLAR MODULE FABRICATION FACILITY IN FAISALABAD

A group of Korean investors called on chief executive officer Punjab Board of Investment and Trade (PBIT) on Monday to sign a Memorandum of Understanding (MoU) for the establishment of a solar module fabrication facility in Punjab. According to the spokesperson of the PBIT the MoU was facilitated by PBIT. CK Lab Co Ltd and CK Solar Co Ltd are both public limited companies that want to establish a CK-Si-PV(tm) solar module fabrication business in Faisalabad M-3 City. The Korean delegation was led by Dr Choi Moon-Sok, CEO of CK Lab Co Ltd Jin Dae-Hyun, CFO CK Lab Co, Ltd, Go Joomyeong, Vice Chairman of Head Office, KEPCO Plant Service and Engineering Co, Ltd, Jang Byung-Won, Executive Manager, and Sooba Khan, Ex-Honorary Investment Counsellor of Pakistan to Korea were also in the delegation. Amena Cheema, CEO PBIT, briefed the delegation regarding the value propositions offered by Punjab. She also briefed the delegation on opportunities and prospects offered by Punjab for establishing their manufacturing facility. She introduced them to the representative of the Faisalabad Industrial Estate Management and Development Company that will offer them developed land in Faisalabad M-3 Industrial City. Dr Choi Moon-Sok appreciated the role of PBIT for providing facilitation for the acquisition of land and described their plant and technology to PBIT. He thanked PBIT for its efforts during the last few months to respond to their queries and assist them in making informed decisions. It was agreed that CK Solar will send their work plan to PBIT for facilitation and servicing. The company also desires to establish solar power generation plant in Punjab.

Copyright Business Recorder, 2016

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KP CHIEF MINISTER INAUGURATES MICRO HYDEL POWER PROJECT

KP Chief Minister Pervez Khattak has inaugurated 150 kilowatt Lalko micro hydel power project in Matta, district Swat. On this occasion, the CM also directed the acceleration of the pace of work on 356 micro hydel power projects to arrest energy crisis in the province. The provincial government in this connection has completed 81 MW project in Malakand, Pehur 18 MW, Rashin (Chitral) 4.2 MW and 1.8 MW Shashi Hydel Power Project, Chitral so far. The completion of these projects had helped the province in earning a receipt of Rs 25 billion per annum. The CM clarified that federal government had always usurped the rights of KP, saying the provision of 600MW electricity to the province is the responsibility of the centre. He said that the share of KP in the electricity is 14 percent, but it is being provided only 10 percent. Meanwhile, addressing a public meeting in Shamozai, district Swat; the CM said that after handover of Water and Power Development Authority (WAPDA) to KP government, power load shedding will be abolished in the province. He said after coming into power, the provincial government recruited 45000 teachers on the basis of merit and through NTS test to bring improvement in the primary education. Criticising the previous government of ANP in Khyber Pakhtunkhwa, the CM said that terrorism was at peak during its government and they were unable to hold public meetings in open places, but now the situation had improved and they are addressing the people publicly. On the demand of the Special Assistant, Amjad Ali Khan, announced the approval of the establishment of Degree College and up-gradation of Barikot Hospital and construction of playground.

Copyright Business Recorder, 2016

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AGREEMENT INKED ON CONSTRUCTION OF 870 MEGAWATTS HYDRO POWER PROJECT

The government of Khyber Pakhtunkhwa and SK Hydro Pvt Limited and Industrial & Commercial Bank of China Limited Wednesday signed an agreement for the construction of 870 MW Suki Kinari Hydro Power Project. Provincial Minister of Energy and Power and Education Muhammad Atif Khan attended the occasion. Under the agreement this Mega Project would be completed at a cost of Rs 200 billion within 5 years. The province besides getting Rs 1.5 billion annual as water used charges, will also get additional 113 MW electricity of its share. The electricity produced from this project would be transferred to National Grid for further distribution to the entire country. After 30 years, this project would be handed over to government of Khyber Pakhtunkhwa free of cost and its full income would be given to this province. Talking to media on this occasion, the energy and power minister Muhammad Atif Khan said that this project was not only useful for Khyber Pakhtunkhwa but for the entire country. It would prove helpful in removing short fall of electricity in the country. He disclosed that KP Government was soon going to ink agreements of 69 MW Lawi, 84 MW Mataltan, 300 MW Balakot and Sharmai Hydro Power Projects and practical work would also be started on these projects soon. Atif Khan maintained that Hydel Power generation was not only the cheap but it also puts positive environment impact as compared to coal power adding that it would also save forex reserve of the country. He said that these projects would go a long way in economic development of the country side by side ameliorating the lot of the common man.

Copyright Business Recorder, 2016

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ADB APPROVES $810 MILLION FOR POWER TRANSMISSION SYSTEM

The Asian Development Bank (ADB) has approved an $810 million multi-tranche financing facility to develop Pakistan''s power transmission system, to improve the reliability and quality of energy supply, and to meet increasing demand for electricity. "A reliable and sustainable power sector is critical to the economic growth and wellbeing of Pakistan," said Megan Wolf, Energy Specialist with ADB''s Central and West Asia Department. "Fast implementation of this facility and related reforms to alleviate power shortages will improve the prospects for the economy." The loan facility will help fund the staged rehabilitation and expansion of the transmission network, increasing transmission capacity and energy efficiency and security. It will also support government efforts to develop a more transparent and efficient power sector by promoting reforms in the National Transmission and Despatch Company Limited, and the sector''s newly established commercial operator, the Central Power Purchasing Agency (Guarantee) Limited. ADB''s facility will be delivered in tranches, implemented from 2016 to 2026. Power shortages are a major obstacle in Pakistan''s economic development. With demand for electricity outpacing supply, inefficient and inadequate transmission and distribution systems are key bottlenecks in the development of the energy sector that is stifling growth and threatens social strife.-PR

Copyright Business Recorder, 2016

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CHEVRON STARTS RS TWO BILLION INVESTMENT PLAN

Chevron Pakistan Lubricants (Private) Limited (CPLPL) Tuesday embarked on its plan to invest over Rs 2 billion across the country, said a company statement issued here. The groundbreaking ceremony was held at Chevron's West Wharf Lubricants Blending Plant in the city. Chevron's regional and in-country lubricants leadership inaugurated the project at Dockyard Road, Karachi. Earlier this year, Chevron Pakistan announced confirmed plans to spend over Rs 2 billion in the country in the next three to four years to upgrade and expand its Lubricants Blending Plant in West Wharf as well as other facilities across Pakistan, which will make them state-of-the-art establishments. Tuesday's ceremony marked the start of Chevron' latest investment in Pakistan, which when completed, would provide state-of-the-art infrastructure including the installation of fully automated high-tech blending equipment and new blending control system. The investment will also include construction of new bulk storage tanks, additive decanting bay and bulk filling facility. "Chevron is committed to grow its Lubricants business in Pakistan, and this investment is a testament of its intent. Over the years, our Pakistan lubricants business has shown significant growth and it is important that we invest today, for a brighter tomorrow," said Farrukh Saeed, Vice President Asia Pacific. Chevron Corporation, one of the world's largest integrated energy companies, markets its lubricants products in Pakistan under the Havoline and DELO brand.

Copyright Business Recorder, 2016

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POWER STATION TO BE SET UP FOR GWADAR PORT: AHSAN

A power station would be established especially to meet the electricity demands of Gwadar Port. A master plan would also be prepared for the residential settlement of Gwadar city. Federal Minister for Planning, Development and Reform Ahsan Iqbal Friday said this while briefing Senate Standing Committee on Planning, Development and Reforms on China Pakistan Economic Corridor (CPEC) projects. The committee met with Senator Colonel Syed Tahir Hussain Mashhadi (Retd) in the chair at Parliament House. The minister said that Prime Minister Nawaz Sharif Thursday directed the Ministry of Water and Power in his Cabinet meeting to start working for establishment of power station especially to meet the electricity demands of Gwadar Port city. The Additional Secretary of Balochistan for Irrigation and Power Department told the committee that 70MW electricity is being imported from Iran for Gwadar Port and other areas. He said there is 20 MW shortfall of electricity in these areas. He said that 120 MW of electricity would be required in future after the development of Gwadar Port. He said that Pakistan is importing electricity from Iran at the rate of 9 to 10 cents per unit. After the committee meeting, while talking to media Minister said that Diamer Bash Dam has been made part of the CPEC. He said that the total cost of Diamer Bash Dam is $14 billion and it would be completed in two phases. He said that there is need of $6 to $7 billion of consortium for this project and decision in this regard will be taken this year. Earlier in the meeting, the Secretary Planning, Development and Reforms told the committee that Port Qasim Coal Power Plant with the cost of $2 billion and Sahiwal Coal Power Plant with cost of $1.6 billion would be completed in two years. He said that energy projects of 10,400 MW including 7,500 MW from coal power plants, 1,250 from wind power projects and 1,590 from hydel power projects have been started under CPEC. He said that electricity would also be generated through Solar System. Senator Muhammad Mohsin Khan Leghari said that air pollution would increase through coal power projects as it has increased in China. Secretary Planning said that 80 percent electricity in China and 70 per cent electricity in India is being generated from coal power projects. Answering a question, he said that coal would be imported from Malaysia and Indonesia for Sahiwal Coal Power Plant. He said that Thar Power Plants project would be completed in three years with the cost of $2 billion while 134MW electricity would be added to the national grid station next month.

Copyright Business Recorder, 2016

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100 PERCENT INCREASE LIKELY: LPG IMPORTS SOAR TO 286,000 TONS IN 7 MONTHS

The import of Liquefied Petroleum Gas (LPG) during past seven months has reached 286,000 tons, which is likely to touch 500,000 tons showing a 100 percent increase due to reduced international prices. Local LPG production is likely to increase by 12,000 tons per month within next few months as state owned Oil and Gas Development Company (OGDCL) has completed installation of a state of the art LPG plant in Kunar Pasaki. Talking to Business Recorder on Tuesday, Mohammad Irfan Khokhar, Chairman, All Pakistan LPG Distribution Association said that auto sector had become largest consumer of LPG in the country. He said at present LPG was the cheapest fuel costing Rs 32-25 per litre against Rs 47 of CNG and Rs 66 of petrol. The Oil and Gas Regulatory Authority (Ogra) had issued 155 licenses for establishment of Liquefied Petroleum Gas (LPG) outlets out of which seven had become operational, he added. He said as a result of increase in local LPG production which was likely to reach 2,500 tons a day from current 1,800 tons a day and removal of international sanctions against Iran LPG demand/supply situation was not likely to remain in balance. Due to serious gas shortage from November 2013, gas supply to Punjab based CNG station was suspended as a result at present over 1,000 Punjab based CNG stations are shutdown and around 1,000 are operating on imported Liquefied Natural Gas. Irfan said closed CNG stations could be made operational if the Ogra granted licenses to the owners of those outlets, adding it would not only reduce burden on foreign reserves but would also help reduce omission of toxic gases as LPG was environment-friendly. He urged the government to reduce port charges on LPG imports from $32 per ton to $10 per tons as per international standards as well as abolishing advance tax on the imports, saying that cumulative impact of those measures would reduce LPG price by Rs 7 per kg. He said that in 2014, Pakistan imported a total 62,000 tons of LPG which in the year 2015 jumped to 145,000 tons and in first six months of 2016 the import of commodity had reached 286,000 tons which by the end of year was likely to cross 500,000 tons. Khokhar urged the government to reduce taxes on the LPG which would further bring down the prices and help save foreign exchange being spent on the import of expensive crude oil, refine diesel and petrol.

Copyright Business Recorder, 2016

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SHANGHAI POWER MAY ACQUIRE KEL: MULTIBILLION DOLLARS SELL-OFF DEAL AWAITING SEPTEMBER AGM?

Friday was no exception for the privately-run listed power utility, K-Electric Limited (KEL), to have topped the list of most-traded equities at Pakistan Stock Exchange (PSX). Having been counting millions of its listed shares changing hands on a daily basis, the Karachi-based KEL appreciated in value to Rs8.71 in the week's last session with 56 million shares trading. Trigger for this bull-run in the market shares of UAE-based Abraj Group firm is its possible acquisition by a powerful consortium comprising Shanghai Power Electric (SEP) of China and Engro Corporation of Pakistan in a $2.5-$2.8 billion deal, reportedly. Two of the three stakeholders, KEL and Engro Corp, have rebutted the media and brokerage reports talking of any such development. "There is no such thing taking place at this time," KEL spokesperson Sadia Dada toldBusiness Recorder Thursday. The utility's director communication "categorically" said that "the rumours circulating in the market are baseless". Before that, Engro Corp came in denial of the reported sell-off deal. "The news item circulating in certain sections of print and electronic media stating that Engro Corporation has shown interest in a bid to purchase K-Electric, the company clarifies that it has neither expressed interest nor participated in any bid to purchase K-Electric," reads a press alert the conglomerate issued Thursday. Asked for a rationale, an insider at Engro cited the government's "increased intervention" in the electricity supplier's affairs as a major bottleneck for it to be a stakeholder. "The political thing, you know," he said. With SEP, the major potential acquirer, keeping mum on the media hype the market analysts, citing media reports, estimate the size of the unconfirmed deal at $2.5 billion to $2.8 billion for KEL's 18.15 billion shares, constituting 66.4 percent held by KES power (Abraaj group and Al-Jomaih Group). They see the acquisition price ranging from Rs14.3 to Rs16.0 per share. "We believe near-term market reaction to this media report is likely to be positive in the case of KEL," viewed Syed Atif Zafar, an analyst at JS Research. Tahir Abbas at Arif Habib Limited Research said its equity value put at $2.5-$2.8 billion the KEL's acquisition price would translate into Rs9.5-10.6 per share. "Moreover, if the transaction value is $2.5-2.8 billion then its acquisition price will be Rs14.3-16.0/share," he said. With market forces having done their calculations, the scrip peaking to new highs on PSX, Engro having distanced itself from issue and KEL coming up in a complete denial, some insiders at the power utility insist that the talk-of-the-town has some substance in it. "They are in talks with Chinese but nothing concrete is expected to come up before September AGM (annual general meeting)," an insider confided to Business Recorder. In the shareholders meeting, he said, the company's financial accounts, dividends etc, would be declared that would help the two sides determine the transaction price of the sell-off. "Chinese had visited KE's power houses 8-10 days ago," he claimed adding the UAE-based owners of KEL might sell out 51 percent of their 71 percent shareholdings to retain the balance. "They (Abraaj) would keep their participation as they are working, under the name of K-Energy, on the conversion of two gas-based power plants, Unit 1 and Unit 2, into coal-based at Port Qasim," he explained. Augmenting his claim, the insider said those doubting the sell-off deal taking place should look at KEL's share trading at the stocks market. "Whenever a company is put up for sale its share prices appreciate," he said adding "It would go up to Rs10 per share by September-end". Top officials at the ministry of petroleum also have a buzz of the issue as one such high ranking official said: "This is probably Abraaj selling K-Electric". "They (Abraaj) had tried (South) Koreans before. May be its Chinese now," he added. Talking about a government touch in the issue, the official said the same was limited to Islamabad's current shareholding in KEL and any shareholders agreement. "In my opinion NEPRA approvals will be a larger issue," the official opined. Asked to elaborate the complexities if any, he said: I don't see any but I am sure NEPRA would find some". If seen in the backdrop of the insider's claim that the SEP-KEL deal might materialise belatedly in September, one can have some insight into Dada, KE spokeswoman, using words like "this time" while refuting media reports.

Copyright Business Recorder, 2016

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'KP HAS POTENTIAL TO PRODUCE 0.2 MILLION BARRELS OF OIL PER DAY'

Chief Executive Officer (CEO), Khyber Pakhtunkhwa (KP) Oil & Gas Development Limited (KP-OGDCL), Raziuddin Razi has said that oil production in the province has been increased to 44000 barrel per day and in case of the provision of required funds and rigs it could be reached to over 2,00,000 barrel per day. This was revealed by him while briefing a meeting regarding oil and gas sector of Khyber Pakhtunkhwa here in Civil Secretariat with Provincial Minister for Finance, Muzaffar Said advocate in the chair. Besides, other Secretary Finance Ali Raza Bhutta also attended the meeting. The CEO KP-OGDCL said that gas production in the province has been reached to 400m cubic feet per day (MCFD) against the requirement of 300MCFD. He said that after the provision of the required funds to the company the production of the gas could be increased to 2000MCFD. Similarly, he said that the company has also started work on the installation of the Polyester plant and in case of the provision of resources, the plant will be completed in the minimum time period to meet not only the requirements of the province rather the demand of the whole country and handsome amount of foreign exchange could also be saved. The provincial finance minister while appreciating the performance of the company expressed the hope that projects of energy sector including oil & gas and LPG will be completed on emergency basis, which is pre-requisite for the industrial development of Khyber Pakhtunkhwa. He said that the provincial government is serious in the establishment of oil refinery in the province, which could develop the country on the pattern of Gulf States and the youth of the province will not be required to seek overseas employment. He said that pace of work on micro-hydel projects has been accelerated. However, he urged the company to look into the possibilities of oil and gas in northern districts of the province particularly in Malakand Division. For this purpose, he also stressed for the utilisation of modern technologies including Google and GPS. The provincial minister expressed happiness that Khyber Pakhtunkhwa is meeting 50% national demand of oil and more than 14% gas.

Copyright Business Recorder, 2016

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PBIT SIGNS MOU WITH GRACE REFINERY

The Punjab Board of Investment and Trade (PBIT) has signed a Memorandum of Understanding (MoU) with Grace Refinery, an international petrochemical company, for $5 billion investment in Punjab. The signing of the MoU was took place here at PBIT headquarters on Friday. PBIT Chief Executive Officer (CEO) Amena Cheema and Grace Refinery CEO Uzma Bashir signed the MoU on behalf of their respective organisations. The six-person delegation of Grace Refinery was led by their Chairman, SM Ghaus, which includes Uzma Bashir, its Chief Executive Officer and Brigadier Shehzad Akhtar (r), the Project Director. Grace Refinery CEO Uzma Bashir said that ground breaking ceremony of the refinery will be held in November this year and the project will be completed in five years. She said that her company was going to introduce the latest, Euro 6 standard, refinery technology in Pakistan that would reduce carbon emissions from fuels. She said the refinery with 220,000 barrels per stream day (bpsd) capacity would substantially substitute oil imports in the country and generate around 50,000 to 70,000 direct and indirect employment opportunities in South Punjab. She also disclosed that the Grace Refinery was negotiating with its crude oil suppliers to join hands in building an oil pipeline from the source into Pakistan for its feedstock. Bashir said the project would take three to five years in completion but the company was trying to channelize the investment during the present government regime. She also appreciated the efforts of PBIT CEO in realizing the investment in Punjab. She expressed her confidence and faith in able management and governance of the province of Punjab. She highlighted the attraction in Punjab's competitive landscape, strong governance framework and endless possibilities for businesses. She also thanked Punjab Secretary Industries Khalid Sherdil for his logistical support. Speaking on the occasion Cheema said the MoU was a part of an ambitious venture that will have a positive impact on both the economy and local population. She said that all credit for this latest achievement and the overall economic turnaround in Punjab went to the Punjab Chief Minister Muhammad Shahbaz Sharif and his visionary leadership. Over the past few months, she disclosed, the PBIT remained in close contact with Grace Refinery, holding several meetings and video-conferences with their management to convince them to invest in Punjab. Subsequently, a meeting was held at PBIT office in Lahore to materialise the deal. Under the MoU, she said, the PBIT would act as one window facilitator for the Grace Refinery for fast-track facilitation and necessary support for early commissioning of the project. The board would also help the foreign company in acquisition of necessary licenses and land for their market entry, she added.

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IP GAS LINE KEY TO COUNTRY'S DEVELOPMENT: PASHA

Hafiz Pasha, Pakistan's former Finance Minister has said that the price of the gas that is to be supplied through the Iran-Pakistan pipeline (IP) is attractive and country's development depends a lot on this project. In an interview with an Iranian daily, he said this project has to be revived at the earliest because it is the most viable and feasible one for Pakistan". He added that the project should be completed at the earliest since strong economic and trade ties are in the interest of both Iran and Pakistan. Comparing IP with other energy projects-such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline-Pasha claimed that IP is the most suitable for Pakistan. Aside from the gas pipeline, the former finance minister also suggested that Pakistan should also try to sign a trade agreement with Iran for other products. "Pakistan should also try to sign bilateral trade agreement with Iran with special focus on the exports of rice and textile products to Iran and import of oil products from Iran," Dr Pasha said. The IP pipeline would span 1900 km, bringing natural gas from Iran to Pakistan. Initially it will bring 750 million ft/d of gas, which will increase to 1 billion ft/d.

Copyright Independent News Pakistan, 2016

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RENEWABLE-ENERGY: APBF FOR CHINESE EXPERTISE TO REDUCE CRISIS

The 'All Pakistan Business Forum' has urged the government to harness the vast potential of renewable energy sources, to overcome the energy crisis in Pakistan. A robust new opportunity has been created for off-grid applications of renewable power technologies, as a large number of Chinese investors, engineers and experts are currently engaged in building large infrastructural projects, under the 'China-Pakistan Economic Corridor' (CPEC). President of APBF Ibrahim Qureshi suggested that, "The current power shortfall in Pakistan is around 4500MW to 6000MW and is estimated to cost the economy more than two percent of GDP annually, whereas the power demand is growing at about eight percent per annum. This factor is consistently hampering economic growth. The Pakistani entrepreneurs can seek resourceful solutions from the Chinese experts, to curtail the energy challenge." The primary scope of renewable technologies comprises solar and wind power generation, to help in reliable electrification of industries, educational & health-care institutions, telecom towers, water-heating plants, etc in Pakistan. Moreover, the Chinese companies can also help the rural and remote communities in installing; independent solar tube-wells, bio-gas milk-chiller plants and wind-mill farms for domestic lighting and other essential uses to enhance energy-security. Pakistan can greatly benefit from the presence of Chinese engineering enterprises and experts in the country, hence ensure a cleaner, greener and energy-abundant future.-PR

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300 MEGAWATTS COAL POWER PROJECT: PPIB RETURNS $0.3 MILLION ENCASHED PG

The Private Power Infrastructure Board (PPIB) has reportedly returned encashed Performance Guarantee (PG) of China Machinery Engineering Corporation (CMEC) amounting to $0.3 million in violation of its own policy, after directives from the top brass of Water and Power Ministry, well-informed sources told Business Recorder. The Board, sources said, was apprised that Letter of Intent (LoI) was issued to CMEC on November 19, 2014 for establishment of a 300 MW local coal-based power project at Pind Dadan Khan (salt range) pursuant to the "guidelines for setting up of private power projects under short term capacity addition initiatives- August 2010". The Government of Punjab had forwarded the project to PPIB with the assurance that sufficient local coal was available to meet the fuel needs. The project was subsequently included in the actively promoted projects'' of China Pakistan Economic Corridor (CPEC). As per the LoI as well as the guidelines, the sponsors were required to obtain Letter of Support (LoS) from PPIB within one month of tariff determination. However, despite PPIB''s request, the company failed to submit the Performance Guarantee (PG) for issuance of LoS. In response to PPIB''s request, CMEC on February 17, 2016 revealed that the project could not be developed further due to :(i) non-availability of coal resources, both in terms of quantity and quality, in their allocated area; and (ii) unacceptability of the tariff determination by Nepra( on February 4, 2016) to the company. The Board was further briefed that the Government of Punjab had not agreed to the stance of CMEC and had explicitly stated that the company had made up its mind to abandon the project as there was no issue in the quality and quantity of coal (as well as its suitability for power production) in the salt range area. Managing Director PPIB explained that in case a sponsor decides to abandon a project and fails to obtain LoS after tariff determination by Nepra, neither the LoI nor the guidelines provide any recourse other than encashment of PG. The PPIB worked for a long time to convince the sponsors to move forward with the implementation of the project to which the company did not agree. Hence, PPIB was left with no option and encashed the PG on May 11, 2016, just a few days prior to the expiry of PG. Subsequently, the company (through its letter of May 13, 2016) requested the Minister for Water and Power/Chairman PPIB Board to look into the matter urgently and cause to return the proceeds of the encashed PG to the company in order to resolve the matter amicably and to avoid adverse message to the investors in CPEC projects. Further, CMEC also filed a civil suit, before civil court Islamabad, challenging the encashment of PG and the matter was sub-judice. MD PPIB apprised the Board that the matter was being presented for the guidance of the Board as per the instruction of Chairman PPIB. Minister for Water and Power, Khawaja Asif argued that the project sponsors should not be penalized due to the non-availability of both quality and quantity of coal to undertake the project or erroneous assurances on the part of the Government of Punjab. Secretary Water and Power, Younus Dagha remarked that such penalty would have serious implications for the ongoing power projects under CPEC and that the project sponsors, having incurred significant exploration costs in the coal field, were undoubtedly very eager to develop the project. However, as pointed out by the company, if coal reserves are not adequate, they should not be penalized. MD, PPIB clarified that the guidelines and the policy do not cover return of the proceeds of encashed PG. The matter was discussed at length and it was observed that the facts and figures relating to coal availability provided by the Government of Punjab were not correct and reliable, however, field studies conducted by CMEC established the fact that the required quantity and quality was not available at the leased site which made the project unviable and unfeasible therefore, there was no grounds to penalize CMEC and forfeit its PG. Further, it was elaborated that the mechanized or semi-mechanized mining was not possible at the allocated site. After detailed discussion the Board advised PPIB to return the amount of PG to CMEC. When contacted, PPIB spokesperson Sami Siddiqi said that PG was encashed as per the policy and provisions of the LoS.

Copyright Business Recorder, 2016

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