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Hubco to set up 1,320MW coal-based power plants

Updated January 20, 2015

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ISLAMABAD: The Hub Power Company on Monday announced that it will set up 1,320MW coal-based power plants next to its thermal power station at Hub in Balochistan and gradually enhance coal based generation to 3,600MW.

Speaking to journalists, Hubco’s Chief Executive Officer Khalid Mansoor said the company’s board of directors had formally approved development of two coal-based power plants of 660MW each.

The two plants would be initially run on imported coal for which a coal jetty would also be developed, he said.

He added that the solution to re-emergence of circular debt and power sector problems lied in improvement in energy mix that was too expensive at the moment and induction of coal based power generation was one of the cheaper energy sources.

Mansoor said the coal-based power would continue to be cheaper with an increase in its generation in contrast to expensive oil based power generation.

He said Hubco had enough land available near its 1,292MW thermal power plant to house six coal plants of 660MW each and the company has added 1,320MW capacity in the first phase.

“We can construct 3,600MW coal-based power plants at Hub and LNG based plants should be set up in Punjab following dip in prices,” Mansoor said.

He said the government of Pakistan and Chinese banks had agreed to set up a revolving fund to maintain money equal to one month’s invoice to avoid payment issues due to circular debt in power sector for extending loans for Thar coal project.

He informed that Chinese banks had accepted the government guarantees of Pakistan with the setting up of a revolving fund during the visit of Finance Minister Ishaq Dar to China.

He said the National Electric Power Regulatory Authority (Nepra) had capped upfront fee for Sinosure (insurance cost) at seven per cent, but because of the presence of circular debt, the company asked for a fee of 9pc for credit risk insurance.

“Now, China has agreed to cap fee at 7pc 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 cents per unit from existing 22 cents per unit.

“The price of LNG have come down to $8 to $9 per unit from over $16 per unit and the time is ripe to set up a 3,000MW LNG based power plants near load centers in Punjab where transportation of coal would not be feasible,” he said.

He said Hubco was also interested to take part in privatisation of generation companies 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 $5 billion circular debt in 2013, it had again reached similar levels within a year,” he said.

Therefore, he said coal based IPPs should be pursued immediately for reduction in the cost of energy mix.

He said no project could reach financial close unless the menace of circular debt was 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 Pakistan’s $15bn spending on oil imports was not sustainable.

Responding to a question, the Hubco chief said Thar Projects were included in Pak-China economic corridor priority projects list and both mining and power projects had been categorised as “Early Harvest Projects (EHP).” He said the government will provide $700 million sovereign guarantee for Thar mining project.

He said it should be national goal to curb dependence on foreign oil and look towards investments in indigenous resources like coal and hydro to help build local energy economy.

Published in Dawn January 20th , 2015

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