United States has told Pakistan that any further investment in Pakistan’s solar energy initiatives is subject to the tariff settlement of five existing wind projects funded by the US International Development Finance Corporation (DFC).
According to Business Recorder, US Ambassador to Pakistan Donald Bloom met Pakistan Minister of State for Foreign Affairs Hina Rabbani Khar last month and among other important matters, also raised the issue of five wind power projects. DFC has already proposed to revise the Power Purchase Agreements (PPAs) of these projects.
The US ambassador made it clear that Pakistan should not expect further investments from DFC until the issue is resolved. Khar responded that the issue is technical and will require input from all the stakeholders. She also assured the ambassador of seeking a mutually beneficial solution for the matter.
“It is imperative that this issue does not become an irritant in our bilateral relationship. Ministry of Energy may engage with the US side to amicably resolve this matter expeditiously to avoid any negative outcome,” the sources quoted the Ministry of Foreign Affairs.
The government of Pakistan is reviewing all Power Purchase Agreements (PPAs) under the World Bank-sponsored Affordable and Clean Energy (PACE) Initiative which require to settle generation tariffs of IPPs.
DFC had offered to immediately reduce tariffs by 20-30 percent on DFC-sponsored projects in response to Pakistan’s call to reduce tariffs on all Independent Power Producers (IPPS) in 2020 while honoring the existing contracts. DFC offered to carry additional risk by offering long-term contracts of +5 years while lowering interest rates by 50 basis points.
Over the years, the US has raised numerous concerns with Pakistan, including the tariff settlement of five wind projects, the clearance of soybean containers, and the IT Ministry’s data protection and privacy laws. Washington has repeatedly advocated for the resolution of these issues in order to implement the 9th Trade and Investment Framework (TIFA) outlined in February and ensure private sector participation in the country.
