ISLAMABAD -  The National Electric Power Regulatory Authority (Nepra) has allowed Rs7.2 per unit (6.54 cents) generation tariff for 1240MW power project of Punjab Thermal Power (Private) Limited, which will be run on re-gasified liquefied natural gas (RLNG), on ‘take or pay’ basis.

Although the decision was taken by NEPRA with a majority vote but member tariff Himayatullah Khan, in his additional note, questioned a special treatment given to Punjab Thermal Power (Private) Limited (PTPL) in terms of guaranteed power purchase (take or pay). He said dozens of hydro, solar and bagasse power projects are being executed with take and pay clause. The demand of take or pay clause was also opposed by the intervener Anwar Kamal Law Associates (AKLA).

The proposed plant, to be constructed in Jhang, will have combined cycle efficiencies of 61.16 percent and 55.76 percent on RLNG and HSD respectively and simple cycle efficiency of 39.2 percent on RLNG.

According to the Nepra’s determination, the project of the Punjab government be entitled to 6.5374 cents or Rs7.1846 per unit for combined cycle operations on RLNG. In case of HSD as alternate fuel, the project would get 11.49 cents tariff or Rs12.63 per unit of levilized.

The petitioner claimed, “The project was neither captive nor short term IPP therefore, the applicability of a take and pay based tariff was irreverent. It put on record that even though its power plants efficiency was above 60 percent, there may be power plants in the future with even higher efficiency levels which may cause the instant power project to fall down in the merit order. So, the banks may not finance the project. Also, the project was based on imported fuel because of which there were long-term contracts of RLNG import with take or pay clauses in the GSA and hence firm commitment for dispatch.

The regulator set the deadline for the completion of the project in 26 months based on the fact that all plant and equipment shall be new, designed, manufactured and tested in accordance with the acceptable standards. The verification of the new machinery will be done by the independent engineer at the time of the commissioning of the plant duly verified by the power purchaser.

The determination has been made on the basis of debt equity ratio of 75:25. Minimum equity requirement is 20 percent. There will be no limit on the maximum amount of equity; however, equity exceeding 30 percent of the total project cost will be treated as debt. The debt part of the project can also be financed through foreign financing or mix of local and foreign financing.

In case of foreign financing KIBOR plus a premium of 4.5 percent shall be applicable. In case of actual premium is negotiated less than 4.5pc, the saving shall be shared between the power purchaser and the power producer in the ratio of 60:40.

In case of foreign financing, insurance fee shall also be applicable with maximum of 7pc of debt service amount in accordance with the benchmark established in the coal upfront tariff. The plant will ensure 92 per cent availability.

The petitioner request of allowing $2 million on account of flood protection, that shall be utilized for protection from flood from the left marginal bank keeping in view the hazards of flood in the area, the Authority decided to allow the requested cost of $2 million with maximum cap subject to its verification at the time of COD on the basis of documentary evidence.

The petitioner request of $37.735 million on account of construction of spur gas pipeline cost of 92kms from off-take point Kabirwala to Punjab Power Plant site was also allowed by NEPRA.

The intervener, Anwar Kamal Law Associates, has recommended that the tariff for the power plant should be determined on the basis of "take and pay" in competitive mode with no responsibility for the supply of fuel on the power purchaser. Instead of setting up new power plants, which are comparatively costlier and that too in haste with terms and condition dictated by the investor, effort should be made to utilize the available power generation capacity to its full and then go for setting up new power plants as per Pakistan's real need.

AKLA requested the Authority not to determine any tariff for "take or pay" or 'must run' power plant . AKLA further requested NEPRA to calculate the financial loss that the power sector and the electricity consumers are suffering and have to suffer the next 25 years due to purchase of electricity from costlier power plants while leaving aside the cheaper electricity available in the generation basket of CPPA.