ISLAMABAD: The government on Wednesday allowed the issuance of a formal letter of interest (LoI) to a Chinese company for setting up an 878-kilometre transmission line from Matiari to Lahore to transport more than 4,000 megawatts of electricity from Thar, Port Qasim and Hub.

The decision was taken at a meeting of the board of directors of the Private Power and Infrastructure Board (PPIB) presided over by Minister of Water and Power Khawaja Muhammad Asif. Meeting participants also allowed the PPIB to process a 300MW power plant at Gwadar by another Chinese company under the China-Pakistan Economic Corridor (CPEC) framework.

The LoI issuance to China Electric Power Equipment and Technology Company (CET) will trigger the process for financial arrangements by the contractor and start laying the 660kV high-voltage direct current (HVDC) Matiari-Lahore transmission line project.

This is the first transmission line project that is being developed by the private sector and also the first-ever HVDC transmission line in the country that will also include converter stations at both ends and grounding electrode stations near Lahore and Matiari.

The board also cleared the draft implementation agreement (IA) and transmission services agreement (TSA) for approval by the Economic Coordination Committee (ECC) of the cabinet.

The board was told that the first major hydropower project in Khyber Pakhtunkhwa being developed by the private sector under the CPEC has achieved financial close and simultaneously started construction activities.

The meeting allowed the processing of 300MW coal-based power project at Gwadar to be built by China Communication Construction Company (CCCC) under the CPEC.

The board was also informed that the target to commission 14,000MW in five years was double the total capacity addition made during 20 years through PPIB’s facilitation out of which 9,000MW were expected to materialise during the next one and a half years.

The ECC has already directed the National Electric Power Regulatory Authority (Nepra) to grant all those tax breaks to investments in transmission lines that were available to power generation projects.

Although Nepra has already given a tariff, the power ministry was still in the process of seeking further tax breaks on dividends to be earned by the Chinese company and signed a broader understanding in Beijing in December 2016 to take the $1.5-billion transmission line project further.

Nepra allowed in November last year 74 paisa per unit tariff for the project on the government’s request by revising its previous rate of 71 paisa. This was despite the fact the Chinese firm was demanding 95 paisa per unit rate. The project is being developed without competitive bidding because it is a government-to-government deal as part of the CPEC.

However, to facilitate contractors, Nepra allowed higher payloads in the first 10 years on at least three components and on one element for entire 25-year life of the project. The transmission line is central to the transfer of more than 4,000MW of electricity from under-construction power plants at Thar, Hub and Port Qasim to Punjab’s major load centres.

The major relief in tariff was given in the insurance cost, debt servicing, return on equity and return on equity during construction. The original tariff previously approved by Nepra for the first 10 years ranged between 85 and 87 paisa per unit. This has now been revised to 90-92 paisa per unit.

The previous tariff for 11-25 years stood at 37 paisa per unit, which has now been increased to 39 paisa.

The project will take 36-42 months to be developed, although power generation from the plants of Thar, Hub and Port Qasim will start pouring in much earlier. Because of the government-to-government arrangement, the power ministry and the PPIB will not hold the project’s financial and technical evaluation.

Published in Dawn, February 16th, 2017