ISLAMABAD: The government is all set to notify first interim tariff for re-gasified natural gas (RLNG) based power project in Punjab at Rs6.36 (6.06 cents) per unit.

This is down almost 58 per cent when compared with upfront tariff cleared by the power regulator a year ago for RLNG-based projects.

National Electric Power Regulatory Authority (Nepra) had approved on Feb 22 an interim tariff for RLNG-based 1,156MW Bhikki Power Project.

A spokesman for the Ministry of Water and Power Zafaryab Khan confirmed that the competent authority had approved the tariff notification for RLNG-based Bhikki Power Project. “It’s the lowest tariff so far and is all set to be notified,” he said explaining that tariff notification had been sent to the law ministry for vetting.

In its determination, Nepra noted that since the exact timing of payment of EPC (engineering, procurement and construction) contractor is not known at this point of time, therefore, an adjustment for relevant foreign currency fluctuation for $424.02 million of the EPC portion of payment in foreign currency shall be made against the reference exchange rate of Rs105 per dollar on the basis of actual payment.

Nepra had sanctioned 30-year levellised tariff on RLNG at Rs6.36 per unit. It also approved the high speed diesel (HSD) as alternative fuel for the same plant and set its tariff at Rs10.45 per unit (9.95 cents).

The project is being implemented by the Punjab government under its Quaid-i-Azam Thermal Power Company and targeted the plant to go into commercial operations by December 2017. Final tariff will be approved on completion of the project on the basis of actual costs and other factors prevailing at the time, Nepra said.

A power ministry official said the plant availability had been taken at 92pc and will be completed in 27 months and remain functional for 30 years under this tariff.

Nepra had conducted a public hearing for the project tariff on Feb 9 which was strongly opposed by the Sindh government saying RLNG based projects could not be taken in hand without approval of the Council of Common Interest (CCI) because it involved provincial matters under the constitutions.

About two months ago, the regulator had withdrawn upfront tariff for three RLNG-fired power plants (all to be based in Punjab) saying the benchmarks provided by the Private Power and Infrastructure Board (PPIB) for upfront tariff about a year ago had drastically changed.

This had come following Prime Minister Nawaz Sharif’s open criticism of Nepra at the foundation stone-laying ceremony of the Bhikki project for approving higher upfront tariffs. He had said the government was able to secure huge financial savings by holding competitive bidding.

The authority on a petition filed by the PPIB determined upfront tariff for RLNG-based new power projects and announced a tariff for 1,200MW RLNG-based project at Rs15 per unit on April 3, 2015.

However, the ministry did not notify this upfront tariff and instead challenged it before Nepra. Quaid-i-Azam Thermal Power (Pvt) Ltd (QATPPL), a wholly-owned by the Punjab government, also filed a motion for leave to review against the said tariff and sought increase in financial close period, increase in construction period, change in backup fuel and calculation of RLNG price and increase in O&M cost.

Therefore, Nepra approved fuel cost component, operation and maintenance costs, return on equity and debt servicing but did not disclose the project cost or final EPC cost. The government told the regulator that since the projects were being set up under Nepra’s upfront tariff, therefore, EPC and other projects costs were not relevant under Nepra’s upfront tariff regime. “In case we opt for the cost route it would convert the tariff regime from an upfront tariff to a feed-in (cost-plus) tariff regime.”

Sources said the EPC contract of the project has been awarded to M/s Harbin Electrical International Company of China at a total cost of $539.26 million including both offshore and onshore EPC costs. Official sources said the EPC contractor shall install the most efficient H-series gas turbines at the plant manufactured and guaranteed by the General Electric of USA. The SNGPL shall be the supplier of 200mmcfd of gas RLNG to the Bhikki Project.

The electricity produced from the project shall be sold under a power purchase agreement to CPPA and all obligations of the CPPA shall also be covered by a sovereign guarantee.

Published in Dawn, April 23rd, 2016