ISLAMABAD:As a Pakistani team leaves for Beijing to seek reduction in interest rates and extension in the tenure of the debt taken for China-Pakistan Economic Corridor (CPEC) energy projects and nuclear power plants, Chinese companies have ruled out the possibility of renegotiating the power purchase contracts.
In a background briefing to The Express Tribune, representatives of three large Chinese companies said that the matter of whether to restructure the energy debt should be decided between the Chinese banks and the Pakistani authorities.
However, they ruled out the possibility of renegotiating their own terms and conditions, which were related to their profits and the idle capacity payments, and agreed under the Power Purchase Agreements.
Finance Minister Muhammad Aurangzeb leaves to meet with Chinese authorities to seek an extension in repayment of the debt that the government of Pakistan and the Chinese companies have taken from the Chinese financial institutions for setting up power plants.
Pakistan had taken the debt to set up nuclear power plants, while the Chinese companies took these loans for the power plants setup under the CPEC. A Power Division official said that the estimated value of the outstanding debt was around $17 billion for both nuclear plants and CPEC energy projects.
Pakistan has prepared a proposal for up to 8 years extension in energy debt repayments, changing lending currency from US dollar to the Chinese Yuan and seeking a cut in the interest rates, according to Finance Ministry sources.
If accepted by the Chinese authorities, the cumulative impact of these concessions could be around Rs6 to Rs7 per unit reduction in the prices. Only the impact of the Chinese power plants is Rs3 to Rs4 per unit, the sources said.
Pakistan is seeking conversion of interest instruments from Secured Overnight Financing Rate (SOFR) to Shanghai Interbank Offered Rate (SHIBOR). It is also seeking a cut on the interest spread over and above the SOFR or SHIBOR. This would cumulatively reduce the cost of debt around 5%, the sources added.
Similarly, as against the existing 10 years repayment period, the government is seeking five years to eight years further extension, spreading the cost of debt in the energy tariff over a total period of 18 years.
