CHINA TO FINANCE CHASHMA-3 & 4 NUCLEAR POWER PROJECTS

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)

Apr
12 - 18, 2010

China has formally agreed to bear over 80 per cent cost of Pakistan's Chashma-3 and Chashma-4 nuclear power projects of 320 megawatts each. Energy-deficient Pakistan has formally approved $1.91 billion inter-governmental framework agreement for financing of Chashma-3 and Chashma-4 projects with Beijing. Under the deal, China will provide 82 per cent of the total $1.91 billion financing to Pakistan for the projects at Chashma site in district Mianwali of Punjab province. The proposed nuclear plants will generate additional electricity up to 640 megawatt over the next seven years to overcome energy shortages in the south Asian country, which is presently facing a deficit of 4,000 to 5,000 megawatts, resulting in torturous load-shedding for hours in a day.

Chinese companies will complete the work on Chashma-3 and Chashma-4 and the Chinese official bank would repay the amount when the company would submit the bills.

Earlier, China had provided financial and technical assistance to the country for the construction of Chashma-1 and Chashma 2 having a capacity of over 300 megawatts each. Some analysts attach great importance to China's technical and financial assistance and involvement in construction of more nuclear power plants particularly after Pakistan's hopes for civil nuclear cooperation were a non-starter in its 'strategic dialogue' with the United States in Washington last week.

Pakistan would arrange 18 per cent of the total financing of the two nuclear power projects and 82 per cent of the total $1.91 billion financing will be provided by Chinese Exim bank. The federal cabinet in its last meeting had ratified the agreement under which China would provide Pakistan a soft loan for a period of 20 years with eight-year grace period. The two projects are being established for meeting the growing power shortfall in the country and Executive Committee of the National Economic Council (ECNEC) has already approved these projects

The Inter-Governmental Framework Agreement has loaning facility in three phases. The first loan is $104million with an annual interest rate at 1per cent, the second loan is $1billion with annual interest rate of 2 per cent and the third loan is worth $474 million with annual interest rate of 6 per cent.

Chashma-3 and Chashma-4 nuclear power plants are being built by Pakistan Atomic Energy Commission (PAEC) and China Zongyuan Engineering Corporation (CZEC).

Established in March 1983, China Zhongyuan Engineering Corporation (CZEC) is an economic entity, which is directly affiliated to China National Nuclear Corporation (CNNC). Headquartered in Beijing, the CZEC is engaged in the activities of international economic and technological cooperation. It has ascended into the international market and continuously developed and expanded the overseas and domestic markets.

Under the leadership of CNNC, the CZEC has successfully created a precedent in the history for China's exporting of nuclear technology and nuclear power plant to the world. It has taken the construction of large-sized international nuclear engineering projects. It has been listed in the top 225 international contractors for years in success since 1996 by the authoritative magazine Engineering New Record (ENR) published in USA.

PAEC is presently the country's largest Science & Technology organization engaged in the peaceful uses of nuclear energy. PAEC has set up research centers in agriculture, medicine, biotechnology and other scientific disciplines all over the country. The Commission is successfully operating two Nuclear Power Plants- Karachi nuclear power plant (KANUPP) and Chashma nuclear power plant-1. The Chashma-1 is a two-loop power plant with gross output of 325MW and net output of 300 MW and life span of 40 years.

The design of Chashma -3 and Chashma -4 units is similar to the design of under-construction Chashma -2 which is an improved version of Chashma-1 nuclear power plant, which is in commercial operations since the year 2000. Each unit will comprise of Nuclear Steam Supply System (NSSS), a turbine-generator set and the associated auxiliary equipment and installations. The NSSS consists of a reactor and two coolant loops connected in parallel to the reactor vessel. Each loop consists of a reactor coolant pump and steam generator.

In April 2009, Pakistan signed a general engineering and design contract for Chashma-3 and Chashma-4 with Shanghai Nuclear Engineering Research and Design Institute (SNERDI). The units will both have generation capacity of 340 megawatts and a design life of 40 years. Much of the design work has already been completed by SNERDI. Systems and major equipment of the nuclear island, including the NSSS, are designed by SNERDI.

Islamabad had estimated the cost of Chashma-3 and Chashma-4 worth Rs129.905 billion, with foreign currency component of Rs80.360 billion in the Public Sector Development Program (PSDP) for last fiscal year 2008-09. The cost however rose to over Rs140 billion from Rs129 billion mainly because of depreciation of rupee against dollar in last fiscal year.

In 1986, Pakistan and China signed a comprehensive agreement for nuclear cooperation which envisaged supply of power plants and cooperation in the research and development of commercial and research reactors. China also helped Pakistan in the construction of 300MW reactor at Chashma in Punjab which went into operation in 1998. The Chashma plant was designed and built in collaboration with China, which is delivering full power of 300 MW to the national grid since September 2000. It is located near Chashma Barrage on the left bank of River Indus. It has a pressurized water reactor (PWR) and is under International Atomic Energy Agency safeguards.

In April 2005, Beijing agreed to provide two 300-megawatts-electric-capacity nuclear power reactors to Pakistan in the next ten years. In the same year, Chinese Prime Minister Wen Jiabao had clarified during his India visit in New Delhi that Beijing's nuclear cooperation with Pakistan was fully compliant with international anti-proliferation norms and dedicated to peaceful purposes.

Today, nuclear power has become more viable economically and a reliable source of electricity generation. The cost of production from nuclear plant is relatively cheaper. Islamabad has also decided to build a US$1.192 billion Pakistan Nuclear Power Fuel Complex (PNPFC) to attain the capability to manufacture pressurized water reactors (PWRs) and nuclear power plants (NPPs). The facility will be developed by PAEC and it will have the capacity to manufacture the full cycle of nuclear fuel and power plants. The country has already approved setting up of Nuclear Fuel Enrichment Plant (NFEP) at a cost of Rs13.708 billion, including Rs 8.136 billion foreign exchange component so that necessary material could be made available easily for its on-going nuclear activities.