ISLAMABAD: Cash strapped power utility company KESC has decided to convert two of its costly oil and gas based generation units in Karachi to coal based power by leasing them out to a private third party.
Documents available with this scribe show that the management of Karachi Electric Supply Corporation has decided to lease out existing assets, equipment and land of generation units 3 and 4 of the Bin Qasim Power Station to newly formed IPP by the name of K-Energy, established and owned by third party investor Bright Eagle Enterprises.
Power units 3 and 4 of the Bin Qasim Power Plant, having an installed power capacity of 420 megawatts, would be leased out for 20 years and necessary arrangements and preparations in this regard have also been completed.
Under the deal, Bright Eagle Enterprises would have to make some alterations in order to convert the units to more cost-effective coal-based power generation.
Documents further reveal that due to rising debt and tighter financial constraints, KESC was unable to invest in only two power units to convert them on coal.
“Due to higher leveraging of KESC's balance sheet owed to such aggressive reforms agenda, it is not possible to embark upon the coal conversion project of such magnitude immediately as lenders to KESC are looking towards substantial repayment of their existing loans to create such space,” says one of the documents.
“On an annual basis, the supply of gas has ranged between 150-160MMCFD over the last 2 years, which is not even enough to operate the higher efficiency plants at full load around the year. This situation has forced KESC to operate BQPS-I units more on oil than gas. Given the overall gas availability forecast for the country, the supply of gas to KESC is not expected to improve going forward for reasons beyond KESC's control,” the document reads.
It has also been learnt that the KESC has submitted a plea in the National Electric Power Regulatory Authority (NEPRA) seeking amendments in power generation license and issuance of new amended power generation license to the power utility. Sources said the KESC administration has succeeded in securing the consent of the federal government and NEPRA would soon take a decision in this regard.
When contacted by this scribe, KESC spokesman Faraz Ahmad refused to immediately comment on the disclosures. He, however, said that it was "an important matter" and that an official statement would be issued soon after consultation among top officials of the power utility company.
KESC, previously a public enterprise until it was privatised in 2005, was taken over by the Dubai-based private equity firm Abraaj Capital group in 2008.
Since taking over the management, Abraaj Capital claims it has injected equity of approximately US$ 361 million together with arrangement of large amounts of multilateral and local debt. It says the funds were used to pursue an aggressive reforms agenda, which included addition of around 1000MW of generation assets and revamping of transmission and distribution networks.