Private Power and Infrastructure Board (PPIB) has reportedly failed to convince two power companies to change plant specifications from imported to indigenous coal, well informed sources told Business Recorder.
Giving the details, sources said that PPIB Board in its 105th meeting held on May 3, 2016 granted extension in financial closing date to both 660 MW Lucky Electric Power Company Limited and 350 MW Siddiqsons Energy Limited for 12 months without doubling the amount of performance guarantees.
Insiders claim that Board is not empowered to extend LoI and LoS by more than six months, adding that the extension of two months means that substantial financial benefit has been given to both the companies.
The sources said, PPIB Board being conscious of the fact that dependency on imported fuel should be minimised gradually, also directed PPIB to advise project companies to look at the possibility of utilising local coal instead of imported coal for the projects.
The decision of the PPIB Board was communicated to both the companies through letters dated May 27, 2016.
While providing the extended performance guarantees the companies have revealed that their projects are at an advanced stage of development and have achieved significant milestones including but not limited to obtaining generation licence, acceptance of upfront tariff on imported coal, land acquisition and finalisation and initialisation of both Implementation Agreement (IA) and Power Purchase Agreement (PPA), Coal Supply Agreement (CSA) and O&M contracts. Furthermore, both projects have finalised engineering designs of their plants with the EPC contractors based on the Nepra’s approved configurations.
According to sources, both the companies maintain that changing the course of projects midway will not be in the interest of the consumers and investors of the two projects who have already sustained losses due to the change in required financial arrangements by the State Bank of Pakistan (SBP).
The companies further argued that any change in fuel would require revision of all milestones especially tariff determination and PPA.
Both the companies requested PPIB Board to allow them to achieve financial close based on imported coal which may be attained in a shorter time period.
The sources said, just three days after the meeting of the PPIB, Board, Secretary Water and Power Younus Dagha wrote a strongly worded letter to the Managing Director, PPIB, Shah Jahan Mirza, for unbridled issuance of extension of Letters of Intention (LoI) and Letter of Support (LoS) to companies by any power plant on imported fuel, except those agreed bilaterally by the Government of Pakistan and Chinese government and part of the prioritised list of CEPEC projects.
PPIB, in its presentation had showed that 3500 MWs LNG-fired power plants, 2632 MWs of new hydropower and 3960 MWs of coal-fired plants (both local and imported) and other renewable energy projects already under construction will bring in 13207 MWs of new generation capacity by 2018 end, sufficient not only to meet domestic power shortages but also to provide comfortable spinning reserves.
It was also stated that power generation already financed and under various stages of execution will also bring a further capacity of 20360 MWs by 2022, bringing the total installed capacity to 53405 MWs.
Hence, it was decided that no further financial commitments would be justified for purchasing power from private sector, especially on imported fuels.
The Secretary, however, observed that PPIB officials were giving mixed signals to investors about the decisions taken in the Board meeting on May 3, 2016 and pursued Secretary’s office for allowing PPIB to facilitate more projects on imported fuels.
The sources said PPIB placed the proposal to its Board, in its recent meeting, requesting that the companies be allowed to achieve financial close based on imported coal.
An official told this scribe that the Board disapproved the proposal and directed PPIB to have face to face meeting with the power sector companies to resolve the issue. But the PPIB top brass has failed to achieve the goal. -Business Recorder