The resolution of the five wind power DFC projects was discussed during a meeting between the Minister of State and Donald Blome, the US Ambassador to Pakistan, last month.
Islamabad has received a warning from the US not to anticipate any funding from the US International Development Finance Corporation (DFC) until the tariff disputes involving the five ongoing wind power projects are resolved.
In exchange for a concession from the GoP, DFC has already offered to change the Power Purchase Agreements (PPAs) of the wind projects it sponsors.
The resolution of the five wind power DFC projects was discussed during a meeting between the Minister of State and Donald Blome, the US Ambassador to Pakistan, last month.
The sources continued, “Being quite categorical in his assertion, Ambassador Blome stated that Pakistan may not expect DFC investment leading to considerable economic costs until this issue was resolved.”
According to sources, the minister of state for foreign affairs stressed that the tariffs issue was quite technical and required a certain amount of equity from all stockholders.
She was not entirely aware of the technical problems involving DFC projects, but she had a suspicion that some concessions might have affected the terms of the contract.
To find a solution that would be acceptable to both parties, Minister of State gave the US Ambassador the assurance that she would relay his concerns to the Energy Ministry. The Ministry of Foreign Affairs advised the Ministry of Energy to communicate with the US side to quickly and amicably resolve the issue in order to prevent any unfavourable outcomes.
In accordance with the World Bank-sponsored Program for Affordable and Clean Energy (PACE), which calls for the prior action of revising generation tariffs for IPPs, Islamabad started the process of reviewing PPAs for IPPs.
The US has proposed a mutually beneficial solution to finalize the PPA renegotiations between DFC and Pakistan, while also preserving the conditions for future investments in the sector.
DFC proposed a solution to reduce tariffs on DFC-supported wind projects by 20%–30% in response to the government of Pakistan’s request in 2020. They suggested taking on more risk by providing a longer tenor (+5 years) at a lower interest cost (50 basis points).
The resolution of five wind power projects funded by DFC’s Energy Division, the clearance of soybean containers, and data protection and privacy laws (MoITT) are among the unresolved issues that the US has repeatedly expressed concern about.
The US side has maintained that the resolution of these issues is essential to having a meaningful outcome of the 9th TIFA held in February of this year in Washington, adding that if these issues remain unaddressed, the private sector will find it difficult to explore Pakistan’s market.