ISLAMABAD: A group of foreign renewable energy (RE) sector investors have complained to the prime minister over alleged unfair treatment of their investment plans amid changing government policies.
Through a recently created Pakistan Wind Power Foreign Investors Forum, these investors have appealed to the prime minister to take remedial measures before the renewable energy policy was formally approved by the relevant government forums so as to protect their legitimate interests and Pakistan’s business perception among foreign investors.
They have reported to the prime minister that 250MW projects of four investors from China, Iran and the United Arab Emirates were eligible to apply for tariff but they did not because of the December 2017 order of the Cabinet Committee on Energy (CCOE) that held that all RE projects (wind, solar, small hydro and bagasse) would be inducted through competitive bidding against a predetermined capacity to be notified by the government.
The said decision also envisaged that going forward all risks, including those relating to hydrology, wind speed and solar radiation, would be borne by the investors instead of the government as was the case under the 2006 RE policy.
Foreigners involved in renewable energy sector complain over ‘unfair’ treatment
Investors in two other projects — one 50MW each from China and the Netherlands — learnt through different means that relevant authorities were cooking up something different than announced under the December 2017 CCOE order and hence very recently applied for tariff to avoid a roadblock.
All put together, these 350MW proposed capacity entailed $350 million worth of investment that now get affected under the proposed revised RE policy cleared in principle by the Economic Coordination Committee of the cabinet.
Sources said there were many other foreign sponsored wind power projects of more than 600MW involving over $600m investment would not be allowed to move ahead under the amended policy. They said it was surprising for the investors to see a line drawn on the basis of approved tariff when the biggest issue facing the RE industry was the grid availability and those who secured grid availability after years of efforts were put to disadvantage. For a fair treatment, both categories should be put to bidding.
After the expiry of the up-front tariff in 2016, the National Electric Power Regulatory Authority (Nepra) had come out with a competitive tariff but the government could not come up with the tender for bidding and even the competitive tariff expired — causing disappointment and frustration to investors.
The forum “is deeply aggrieved at the mechanism adopted whereby only those projects that have been awarded tariff by Nepra in addition to having grid / generation licence are allowed to proceed while the rest of the projects including those have other prerequisites to apply for tariff i.e. grid / generation license; will be subjected to competitive bidding”, said a letter to the prime minister.
It said the foreign investors were bound to follow the government’s policy in letter and spirit and according to the CCOE’s decision waited for the new arrangement to compete. The same policy was “enunciated by your government repeatedly and the message was loud and clear that no projects will be allowed to move forward on awarded tariff”.
Hence the foreign investors while respecting and abiding by the decision of the previous government and repeated endorsement by the present government did not approach Nepra for award of tariff; even though most of them were eligible to apply. “Coincidently, as a result of the recent decision almost all the projects that will proceed forward are being sponsored by local investors while all those projects that have grid / generation license but not the tariff are sponsored by foreign investors”.
The letter said it appeared that “those who followed the CCOE decision of 2017 are being penalised while those who went against it by applying to Nepra for award of tariff are being rewarded”, adding that it was not only contradictory to current government’s policy of attracting foreign investment, prima facie unjust and arbitrary; but would also seriously undermine and shatter the confidence of the foreign investors. It requested the prime minister to direct the relevant authorities to adopt a fair policy by allowing all projects that are eligible to apply for cost plus tariff i.e. have the grid / generation license to also move forward under the cost plus tariff regime and should be given the consent and time to approach Nepra for award of cost plus tariff.
Published in Dawn, March 12th, 2019