ISLAMABAD: The government is likely to impose liquidated damages on slow-moving coal-based power projects and re-adjust completion timelines of others to minimise expected capacity payments to Chinese contractors of the 2.1-billion-dollar Matiari-Lahore Transmission Line.
This was discussed at a board meeting of the Private Power and Infrastructure Board (PPIB) on Wednesday presided over by Minister for Power Sardar Awais Ahmed Khan Leghari.
The board formally cleared for implementation a decision of the Economic Coordination Committee (ECC) of the cabinet to revise agreements with four power projects to run them on re-gasified liquefied natural gas (RLNG) and approved an indemnity agreement with the Sindh government.
“The chairman advised PPIB, National Transmission and Dispatch Company (NTDC) and Central Power Purchase Agency-Guarantee (CPPA-G) to sit down together and make a thorough analysis based on the actual commercial operation dates of the Thar coal-based independent power projects (IPPs) so that any financial exposure to the government can be avoided,” said an official statement.
The NTDC managing director made a presentation on the analysis of the Matiari-Lahore high-voltage, direct current (HVDC) transmission line, the flow of power from IPPs based on Thar coal from south to north and the financial impact thereof, the statement said.
Matiari-Lahore line may be ready ahead of power projects, causing capacity payments
An official explained that the board was given an overview of the 878-kilometre transmission line from Matiari to Lahore for the evacuation of power generation from Thar to Punjab and some expected slippages on Thar-based projects and mining schedule.
It was reported that apparently the transmission line was expected to be completed ahead of power generation projects that could entail capacity payments to the contractors of the transmission line without actually utilising its power evacuation capacity.
It was also noted that early completion of two smaller Thar-based projects also having provision for the use of imported coal for the initial period before commercial operations could reduce capacity payments on the transmission line and should be encouraged to speed up.
This was also important because of the phasing out of the public-sector Jamshoro power project and private-sector Hubco’s old plant by around 2020 that would spare some existing transmission capacity as well.
It was in this background that the board decided to hold the next meeting in Thar in the second week of February. The board will also take stock of the projects already under different phases at Thar.
The meeting was briefed by PPIB Managing Director Shah Jahan Mirza on activities being undertaken by his organisation for the timely implementation of power generation projects under its portfolio.
The PPIB was currently handling seven projects with a total capacity of 5,600 megawatts.
The board authorised the PPIB to acknowledge the ECC-approved interim agreement for the supply of RLNG to four indigenous gas-based IPPs namely Halmore, Saif, Orient and Saphire. Due to the non-availability of gas, these projects are operating on costly high-speed diesel (HSD). The replacement of RLNG with HSD will cut the fuel price to almost half, thus reducing the tariff considerably, the meeting was told.
The board also granted approval to go ahead with the procedure of executing coordination and indemnity agreement between the federal and Sindh governments. Under the said procedure, a working draft of the agreement will be circulated to the Sindh government through the Ministry of Energy (Power Division). Once finalised by the Power Division and the Sindh government, the agreement would be finally vetted by the Ministry of Law and Justice before execution.
This agreement is required for the projects based in Sindh where the provincial government signs the land lease pact and water use agreement with IPPs.
The federal government is covering default under these agreements in the implementation agreement. The board advised that the agreement should be concluded within one month.
Published in Dawn, January 18th, 2018