ISLAMABAD: A major Chinese firm has bowed out of a Punjab-based 330MW coal-based power project that was scheduled to start electricity production by end-2017.

The $590 million mine-mouth project was a key component of the high profile $46 billion China-Pakis­tan Economic Corridor (CPEC) launched last year by President Xi Jinping and Prime Minister Nawaz Sharif. A letter of interest (LoI) was issued to develop the project on local coal at Pind Daden Khan in Punjab’s Salt Range.

Sources told Dawn that China Machinery Enginee­ring Corporation (CMEC) lost interest in the project because of issues relating to feasibility of producing enough energy for running a 330MW project and a tariff allowed by the National Electric Power Regulatory Authority (Nepra) that was lower than its expectations.

The company which is also a key contractor in the $4 billion 969MW Neelum-Jhelum Hydropower Project in Azad Jammu & Kashmir had been lobbying for 11.67 to 12.4 cents per unit tariff that was far higher than upfront tariffs for projects on Thar coal and imported coal. Nepra allowed a 30-year levelised tariff of 8.55 cents per unit.

Sami Rafi Siddiqui, spokesman for the Private Power and Infrastructure Board — the one-window organisation for private power projects — confirmed that the project was not moving. He said the PPIB had encashed $300,000 performance guarantee of the project sponsor for its failure to deliver on LoI conditions. He declined to give further details at this stage.

The government’s power policy required submission by the sponsor of a perform­ance guarantee of $1,000 per megawatt for fulfillment of LoI conditions and $5,000 per MW performance guarantee for letter of support condit­ions. The guarantees are con­­fiscated by the government in case of sponsor’s failure.

The project envisaged power generation along with coalmining project in the area of Choa Saden Shah with an average production of about 6,000 tons of local coal per day. The CMEC had promised to introduce semi-mechanised mining technique for the first time in the region with an investment of $200 million.

Published in Dawn, May 18th, 2016