ECNEC approves $11.3b CPEC projects

ISLAMABAD: Hours before Prime Minister Shehbaz Sharif’s visit to Beijing, back-to-back meetings of various forums approved almost $12 billion worth of three major projects for inclusion in the multi-billion-dollar China-Pakistan Economic Corri­dor (CPEC) and cleared a longstanding demand by Chinese investors for escrow accounts for automatic payment of their dues against electricity supply.

To set a positive atmosphere for the high-profile visit, these major decisions were taken swiftly by the Economic Coordination Committee (ECC) of the cabinet and the Executive Committee of the National Economic Council (Ecnec) in hurriedly called meetings that took up summaries prepared the same day and delivered to the members on table. Both meetings were presided over by Finance Minister Ishaq Dar.

Interestingly, all the three summaries for development projects for inclusion in the CPEC framework were moved the same day, but assumed exchange rate of Rs200 per dollar for the $9.85bn railway project from Karachi to Peshawar, Rs230 per dollar for Karachi Circular Railway (KCR) and Rs176 per dollar for a small hydropower project in Azad Kashmir.

Ecnec approved in principle a summary of the Ministry of Railways’ modified plan for upgrade of the existing Main Line-1 (ML-1) project at a total cost of $9.85bn (Rs1.97 trillion) from its previously approved cost of $6.5bn in August 2020 — an increase of 45 per cent.

This is expected to be formally pitched for Chinese participation during PM Sharif’s visit and involve Chinese share of $8.4bn.

The approval, in the meantime, is subject to recommendations of cost, technical details and preferably an equity participation financial model on the basis of third-party validation by an independent consultant and in consultation with the Chinese side.

Ecnec also approved the KCR project at a total cost of Rs292.388bn (about $1.27bn) with a foreign share of Rs263.149bn. It approved the establishment of a 48MW hydropower project in Neelum district, Azad Kashmir, subject to revision of cost based on the exchange rate of dollar at Rs220.

Separately, the ECC approved for immediate activation a Rs50bn escrow account — Pakistan Energy Revolving Fund (PERF) — for automatic payment of dues to Chinese power suppliers because insurer Sinosure stopped providing insurance to investments in Pakistan because of heavy buildup of dues in the existing investments. The power sector’s payables to Chinese investors have gone beyond Rs300bn.

The Ministry of Energy (power division) presented another summary on PERF. The ECC, after deliberation, approved the opening of an assignment account under the title of PERF to be opened with the SBP Islamabad and operated by the CPPA.

The ECC also approved as a special case changes to commissioning period of Shanghai Electric’s 1320MW Thar Coal Block-1 Power Generation Company (TBC). The power division had sought amendment to the power purchase agreement (PPA) for commissioning of designated project — CPEC’s TCB-I (on Thar Coal) without financial close.