Power plants set up by Turkish companies: President Alvi faced embarrassment?

Lahore – President Dr Arif Alvi during his recent visit to Turkey is said to have faced some embarrassment for Pakistan government's "discriminatory" treatment of Turkish companies that set up power plants, well-informed sources told Business Recorder. Dr Arif Alvi visited Turkey on 28-30 October 2018 to participate in the inauguration ceremony of Istanbul Grand Airport.

During the ceremony, President Alvi held a meeting with the Turkish President Recep Tayyip Erdogan who highlighted the Karkey case and the "problems" being faced by M/s Zorlu Solar Pakistan (Pvt.) Ltd. operating in Pakistan. The sources said, during a follow-up meeting with the management of M/s Zorlu the President was informed that a change in tariff policy by the Government of Pakistan which changed the cost of its initial investments as per its contractual obligations.

According to the company representative, the actions taken by the Government of Pakistan were forcing the company to withdraw its investments from Pakistan. The President of Pakistan assured the company representative that the government would surely look into the matter and help resolve the issue.

"Ministry of Foreign Affairs has urged the Ministry of Energy (Power Wing) to look into the matter and submit a report on Karkey and the problems faced by M/s Zorlu in Pakistan for submission to the President Secretariat on priority," the sources added.

International Centre for Settlement of Investment Disputes (ICSID), an arm of the World Bank, has awarded the case in favour of the Turkish firm M/s Karkey Karadeniz Elektrik Uretim and imposed a fine of $1.6 billion on Pakistan.

Pakistan has spent around 1.5 billion rupees on lawyers' fees and other expenses, including officials' visits to London including those of former Minister of Water and Power Khawaja Asif and Attorney General of Pakistan. The Turkish firm, M/s Karkey, had registered a claim with the World Bank-affiliated ICSID against the Government of Pakistan early in 2013, for purported violation of the contract of $564.6 million for a period of five years, for building rental power plant in Karachi. M/s Karkey had sought compensation of $ 2.1 billion.

The issue of M/s Karkey is being dealt with by Attorney General for Pakistan. The former Attorney General had visited London to give advice to the law firm. Ministry of Energy (Power Division) is also extending support to the Attorney General.

The Joint Secretary (Power Finance), Zargham Eshaq Khan has visited Turkey a couple of times and requested Turkish government and the company for an out of court settlementl however, the government has not yet received any positive response.

Official documents reveal that Nepra during the hearing of Zorlu's tariff petition that established 100 MW wind power plant, had noted that other solar projects are claiming spreads in the range of 4.3% to 4.5%. Moreover, it was observed that the premiums of 4.25% over base LIBOR was allowed in the most recent cases of comparable renewable technologies. In view thereof, the Authority decided to allow financing cost at the rate of LIBOR plus premium of 4.25% to ZSPL. The claimed debt to equity ratio of 75:25 and debt servicing tenure of fourteen years were found reasonable and approved.

The Authority also noted that financial charges claimed by the petitioner worked out to be around 3% of debt portion of claimed capital expenses. The Authority also decided to allow financing fee and charges at the rate of 2.5% on the allowed debt portion of the approved capital cost of ZSPL. The allowed amount works out to be around $ 1.374 million. Financing fee and charges shall be adjusted at actual rate, subject to allowed amount as maximum limit, at the time of COD on production of authentic documentary evidence to the satisfaction of the Authority.

The Authority had granted tariff of Rs 6.2562 per unit for the first 1-14 years and Rs 6.6358 per unit for the next 15-25 years. Nepra also took the following decisions: (i) levelized tariff at Cents 5.3086/kWh; (ii) Tariff is applicable for twenty five years; (iii) debt service shall be paid in the first 14 years of commercial operation of the plant; (iv) debt servicing has been worked out using three months LIBOR (1.694%) + Spread (4.25%); (v) debt to equity of 75:25 has been used; (vi) Return on Equity during construction and operation of 15% has been allowed; (vii) construction period of six months has been allowed for the workings of ROEDC and IDC; (viii) insurance during operation has been calculated as 0.50% of the allowed EPC cost; and (ix) reference exchange rates of 105 PKR/USD has been used.

"Monitoring Desk"

Leave a Reply

RELATED POSTS

83
Six Pakistani entrepreneurs graduate from UNCTAD, Alibaba’s fellowship
China donates Rs6m more to families of martyred cops
Pakistan coming on track by enhanced export, trade volume with neighboring countries
China says it hopes US can show sincerity on trade
Pak-China air forces to conduct joint exercise
Pak, Kazakhstan strong bilateral trade ties improving day-by-day: Haroon Sharif
Sindh CM’s adviser lashes out at ex-CEO of Thar mining firm
Govt asked to rehabilitate infrastructure in Bara
PDWP approved 37 projects of energy & power sector cost Rs138473 MILLION
Power plants set up by Turkish companies: President Alvi faced embarrassment?
Pakistan, China yet to finalise Gwadar projects
China working with Pakistan to invite third-party companies to join CPEC
New major highway planned in Balochistan under CPEC
CPEC projects security reviewed, vigilance demanded
China needs to play important role to promote CPEC construction in new era

FOLLOW US


About Corridor.pk

Corridor.pk is Pakistan’s leading regional connectivity media & communication/outreach platform, dedicated to profiling and promoting the business activities, news and views on the regionally connected business corridor across OBOR. 

     

Addional Information

 Ethics Policy     Advertise
 Terms & Conditions
 Contact Us