ISLAMABAD: The Punjab government has sought reference tariff for another 1,240-megawatt LNG-based fast tracked power project at an average unit cost of Rs7.10 (6.72 cents) for 30 years with generation expected to begin in December 2018.

The provincial government is already developing two LNG-based mega projects currently in completion phase and was given permission to set up another by the Cabinet Committee on Energy (CCE) on June 6. The new plant will be named Punjab Power Plant Jhang.

The project was opposed by former secretary water and power Younas Dagha and former head of National Transmission and Despatch Company Dr Fiaz Chaudhry for being against the restriction on imported fuel based and outside the demand forecast scenario. Both were removed subsequently.

The plant is being handled by Punjab Thermal Power Limited (PTPL), a wholly owned company of the provincial government to act as an independent power producer. The project will be located near Haveli Bahadur Shah and close to Trimmu Barrage Jhang.

The PTPL had field the original petition on July 27, estimating to achieve financial close by mid-October. The petition had assumed reference charges and costs approved by the National Electric Power Regulatory Authority (Nepra) for other LNG-based projects, but was returned by the regulator. The company now expects financial close in December this year.

The petitioner has now reported that it had secured unprecedented lowest bid prices for engineering, procurement and construction (EPC) and Long Term Service Agreement (LTSA) prices through international competitive bidding from China Machinery Engineering Corporation (CMEC) with Siemens as original engineering manufacturers of H-class combined cycle gas turbines.

The machine is targeted to deliver 61.16 per cent combined cycle efficiency on LNG and 56pc on diesel and 39pc on simple cycle. The project is to ensure annual plant availability of 92pc.

The total project cost has been set at $802 million including EPC bid price of $520 million. It is expected to start simple cycle operations by December 2018 at Rs9 per unit (kWh). It will shift to combined cycle operations by February 2020 and deliver electricity at a 30-year levelised tariff of 6.72 cents (Rs7.10) per unit.

The company seeks more than 41-paisa per unit as return on equity based on 16pc Internal Rate of Return (IRR). The company has sought special treatment for its initial 15-month operations on simple cycle (about half the capacity) to generate five billion units to “help address the growing electricity requirements on account of higher GDP growth”.

But this would mean the project will deliver 39.2pc efficiency which “will still be better than many plants currently in operation and thus feasible for the power purchase in merit order”.

It said the anticipated power generation under simple cycle operations cannot be achieved under a conventional pre-commercial operation date sale arrangement as 10-12 months power generation of the plan will produce electricity worth Rs45mi and hence huge quantum cannot be equated with the concept of pre-COD electricity sale.

The plant will face degradation of efficiency and power output during simple cycle operation which will not be protected if only combined cycle COD was envisaged, said the PTPL saying the simple cycle operations was being requested on unit delivered basis without any guaranteed offtake requirements from the power purchaser.

Former member Energy Planning Commission Dr Syed Akhtar Ali said the return on equity (ROE) should be brought down to 15pc in line with downward trend in the market and Thar coal and Chinese Zurlu voluntarily reducing ROE to 12pc for its renewable energy plant.

He said the debt servicing cost appeared to be on the higher side because Kibor plus 3pc interest for a long term debt was high and should be procured through competitive bidding. Similarly, the bidding should also be held for insurance cost with a view to reducing electricity costs now when there was no emergency situation to secure hurried generation capacity.

Published in Dawn, October 6th, 2017

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