ISLAMABAD, Aug 9: Facing investment squeeze from domestic and external avenues because of circular debt and poor security situation, Pakistan has begun relying heavily on China for long-term energy projects, including assignment of three entire rivers to a Chinese firm for surveying and developing hydropower projects, besides awarding contracts worth over $3 billion.

“We are facing very serious financing and investment problems” due to the huge energy sector circular debt and the poor security situation, the managing director of the state-owned Private Power and Infrastructure Board (PPIB), N.A. Zuberi, said at a meeting of the Senate’s Standing Committee on Water and Power presided over by Zahid Khan of the ANP.

He said Pakistan had to rely on investment from China and Korea because “European and Americans are not coming and Arabs do not support us either”.

When asked by a senator if Turkey was also not interested, he said: “Even they are not interested in long-term investments here.”

The PPIB managing director said Pakistan had assigned Kunar, Poonch and Panjgoora rivers in Azad Kashmir and Khyber Pakhtunkhwa for carrying out a survey and development of hydropower projects, besides involving Three Gorges International of China for overall planning of the country’s hydropower development.

“They have been provided with entire data on other major rivers too so that gauges could be installed at different locations,” he said. Mr Zuberi said Pakistan had also given to the Chinese company 720MW Karot Hydropower Project in Punjab and Kohala Hydropower Project in Azad Kashmir on the river Jhelum with estimated cost of $1.6 billion and $2.2 billion, respectively.

He said the Chinese company had sought a tariff of 7 cents per unit for Karot Project but the National Electric Power Regulatory Authority (Nepra) had approved 5.9 cents per unit which the company was now challenging.

The committee was informed that the government did not encourage oil-based power plants because its tariff had already gone beyond the ‘affordability mark’. While Pakistan required at least 1,500MW of additional generation capacity to meet its demand, the meeting was told the projects being processed by the PPIB for completion until 2019 had a total capacity of about 5,400MW.

Mr Zuberi accused Nepra of delaying tariffs for new projects and counted this as one of the reasons behind subdued interest from investors.

He said the government would have to take steps on an emergency basis to increase the generation capacity.

“Nepra takes too long and forces the investor to run away.” He said the PPIB had even prepared upfront tariffs for coal- and gas-based projects about a year ago, but Nepra has not cleared them.

He said the ministry of water and power was finalising policy guidelines to help the independent power projects set up under the 1994 power policy to convert from furnace oil to coal so that their tariffs could be brought down.

When asked by a senator, he conceded that despite being allowed to set up hydropower projects of any size under the 18th Amendment, the provincial governments were facing problems because they did not have their own distribution system and the National Transmission Dispatch Company was not interested in buying electricity produced by them.

The PPIB chief, however, said two key decisions, including transfer of a private project to the provincial government after 30 years of its operation and an increase in water use charge from 15 paisa per unit to 42.5 paisa for payment to the provincial governments, had been taken.

He said that when the existing IPPs did not get their payments and called government guarantees, new investors shied away. “Local and foreign investors are reluctant to invest because of the circular debt and security situation.” On top of that furnace oil-based projects “have crossed the affordability mark” and gas was not available even for the existing projects.