China abandons Pakistan's Neelum Jhelum Project over delayed payments
- In Reports
- 09:33 PM, Feb 03, 2023
- Myind Staff
The Neelum Jhelum Hydropower Project (NJHP) suffers as China has lost interest in power generation in Pakistan over the issue of delayed payments, reported Asian Lite International. The 969-megawatt project started electricity generation in April 2018 but remains stalled since July 2022 due to blockage in its 68 km-long tunnelling system.
Reportedly, the Chinese have been showing reluctance in extending their helping hand any further.
According to a Pakistan-based newspaper, Business Recorder, the Chinese ambassador to Pakistan, Nong Rong reportedly acknowledged that the Chinese companies have remained reluctant to progress due to delayed payments to Independent Power Producers (IPPs), rising exchange rate and National Electric Power Regulatory Authority (Nepra's) "unhelpful behaviour towards them".
The issues facing the NJHP project indicate a deeper problem in Pak-China cooperation in the power sector. Pakistan owes around PKR300 billion to the Chinese independent power producers (IPPs) and the liability has become a sore point in the bilateral relations.
After undertaking an investigation of its ballooning power sector dues in April 2020, the Pak government pushed for renegotiating tariffs and existing power purchase agreements. The step adversely impacted foreign investors' confidence and raised concerns about the long-term contract sanctity in the country, Asian Lite International reported.
Moreover, as part of its negotiations with the IMF, Pakistan assured the fund that it would try to receive concessions from the CPEC power plants either through a reduction in the profit rates on investment or by rescheduling the loan repayments.
Meanwhile, non-clearance of their dues by Pakistan continued to make the Chinese power sector investors nervous and many of them started accusing Islamabad of breaching the provisions of the agreements, reported Asian Lite International.
They complain that a huge amount of arrears, coupled with the accelerated depreciation of the PKR has significantly reduced their nominal return on investment.
More than ten Chinese investors in power projects have established an Association viz Energy Enterprise Association (EEA) on the pattern of independent Power Producers (lPPs) to raise their issues. Pakistan's delayed response to the long-standing Chinese demand of establishing a revolving account has not helped the situation either.
The "Pakistan Energy Revolving Account" with Rs 50 billion was finally put in place to confirm the CPEC agreement in December 2022.
The logjam has led to a marked decline in the level of understanding between Pakistan and China over joint power projects. Meanwhile, the blockage is threatening the structure of the tunnel with experts warning of a possible collapse.
According to Tauseef Farooqui, chief of the National Electric Power Regulatory Authority (NEPRA), the tunnel is on the verge of collapse at any time and the consequences could be disastrous, reported Asian Lite International.
Image courtesy: Representative image/The Economic Times