OREANDA-NEWS. January 29, 2015. The Hub Power Company (Hubco) chief sees a potential of 3,600 Megawatt (MW) coal-based power plants at Hub Balochistan in a bid to generate cheaper electricity.
 
“We can construct 3,600 MW coal-based power plants at Hub and LNG based plants should be set up in Punjab following dip in prices,” Khalid Mansoor chief Executive Officer (CEO) HUBCO said while addressing a press conference here.
 
Hubco’s Board of Directors has given its management the mandate to develop a two coal based power plants each with 660 MW generation capacity (with an aspiration of 6 x 660 MW) on imported coal-based power plant and coal jetty.
 
He said that government of Pakistan and Chinese banks had agreed to set up ESCROW account with ‘revolving fund’ to maintain money equal to one month invoice to avoid the payment hindrances due to circular debt in power sector for extending loans for Thar coal project.
 
Now, he said that Chinese banks had accepted government guarantees of Pakistan after the setting up revolving fund during visit of Finance Minister Ishaq Dar to China. The regulator National Electric Power Regulatory Authority (Nepra) had capped upfront fee for Sinosure at 7%, but because of the presence of circular debt, the company asked for a fee of 9% for credit risk insurance. “Now, China has agreed to cap fee at 7 per cent and therefore this issue has been resolved,” he added.
 
He said that tariff for coal based power plants had been estimated to reduce by 10 cent per unit from existing 22 cents per unit. “The prices of LNG have come down to USD8 to USD 9 per unit from over USD 16 per unit and it is the ripe time to set up 3,000 MW LNG based power plants in near load centers in Punjab where transportation of coal would not be feasible,” he said. He said that they were also interested to take part in privatisation of Gencos on competitive basis.
 
He said that the root causes of circular debt included inappropriate energy mix, lack of governance and slow response from the regulatory framework. “Despite payment of around USD 5 billion circular debt in June 2013, it has again reached similar levels within a year,” he said adding that to address the energy mix issue, coal based IPPs will need to be constructed immediately and no project will reach financial close unless the menace of circular debt is controlled.
 
“There is no other solution to resolve circular debt other than, enhancing the power subsidy or increasing consumer tariff and improvement on Power Sector governance Issues,” he said adding that Pakistan spends around USD 15 billion per year on oil imports which is unsustainable.
 
Thar Projects are included under the Pak-China economic corridor priority projects list and both Mining & Power projects have been categorised as “Early Harvest Projects (EHP)”. He said that government will provide sovereign guarantee of 700 million dollars for the Thar mining project.
 
He said that country’s existing energy mix was neither sustainable nor affordable as over 40 per cent of power generation is dependent on imported Residual Fuel Oil (RFO). Oil imports make about 33% of the country’s total imports. This results in higher cost of power generation, alarming levels of circular debt and high import bills draining country’s foreign reserves.
 
It is imperative to curb our dependence on foreign oil and look towards investments in indigenous resources like coal and hydro that can help build our local energy economy,” he said.
 
Globally, the percentage of energy production through coal out of the total energy mix is approximately 41%; however for Pakistan this stands at a massive low of 0.1% - a fact which is both alarming and comforting - alarming due to its low constitution and comforting in the fact that we can still make judicious investments today that will help us counter this threat,” he added.