THAR: Ahead of energisation of the first Thar coal-based 660MW power project, the Sindh Engro Coal Mining Company (SECMC) — a public-private enterprise — is seeking substantial reduction in returns on future energy projects and shift in focus to gasification for fertiliser and other uses from domestic coal.
The “generation cost (of electricity) is way too high in Pakistan and becoming so unaffordable” that the consumer is forced to steal it, according to Chief Executive Officer of SECMC Shamsuddin Shaikh.
Speaking to a group of journalists from Lahore, Karachi and Islamabad at the project site, Mr Shaikh said the first Thar coal-based power project of 660MW had achieved 92 per cent physical progress by now against targeted 83pc and the project cost was 20pc less than the approved cost. This had become possible despite the inherent risk of the unknown about Thar, the coal deposit, its quality, etc.
Advocating a reduction both in capital costs and return investments, Mr Shaikh said Pakistan’s power sector had gone bankrupt and it was becoming difficult for the investors to sell their energy to a system which had no way to pay while sitting on Rs700-1,200bn circular debt.
“Pockets are now empty. Expensive power generation has collapsed the national grid.”
Thar coal-based power project of 660MW achieves 92pc physical progress
He said not only the generation cost was very high but the distribution system had too much losses and theft had become part of it because high prices offer incentive.
“Theft will keep on increasing as prices go up,” he said, adding that all stakeholders — the government, companies, investors, consumers — needed to put their efforts together to reduce power prices and make them reasonable.
The SECMC chief said the power generation should now shift to renewable sources where the prices were declining steeply and now stood at 4 to 4.3 cents per unit, compared to above 8 cents of coal and other fossil fuels.
“The future is now in renewable, not in fossil fuel,” he said, adding that his company was now working on solar projects of 200MW and above at 3.9 cents per unit. In the next 20 to 25 years it will be all the renewable energy and the use of fossil fuel will diminish.
He said the National Electric Power Regulatory Authority (Nepra) had given very high rates in the past and should now find the right prices and reduce them.
Responding to a question, Mr Shaikh said the first 660MW project at Thar now in final stage was also given 20pc return but would no more require such rates for the second phase of 660MW.
“Now is the time to rationalise returns and capital costs simultaneously,” he said, adding that every future project should now go through competitive bidding.
“We are ready to reduce prices, others should also bring them down otherwise the country cannot afford electricity while Nepra and CPPA should get together and hold international competitive bidding for all future projects,” he said.
In reply to a question, he said the return on equity (ROE) of 27.2pc for Sahiwal Coal power project was actually 18pc internal rate of return (IRR) on investment which was very high compared to 12 to 14pc global IRRs.
“Sahiwal Power project is a national suicide,” he said in response to a question saying a coal plant in the fertile land of Punjab was not only illogical and hence criminal but also expensive because of huge transportation costs being far away from the port.
When asked what would then be the future of 175 billion tonnes of Thar coal after switching over to renewable, the SECMC chief said the time had come to shift from power generation to other purposes initially to fertiliser production in view of diminishing domestic natural gas. “We should not see our coal just as a resource to produce power, in fact, world is now converting coal into diesel, gas and industrial materials and we should also start working in this direction.”
He said the first ever Thar-based 660MW Lignite Coal Power plant was set to go into production by January 2019 against scheduled commercial operation date of June 2019. With 94pc and 92pc completion respectively, the power project and mine project both are five months ahead of their schedule and will add the first electron from Thar to the national grid by January 2019.
He said the company successfully connected its power plant with the national grid to receive back-feed power supply for plant startup. The next part of this dream will be achieved by next month or January 2019, when the first electron from Thar Coal will be added to the national grid. Prime Minister Imran Khan is expected to inaugurate the project.
Mr Shaikh suggested that all coal projects in Pakistan, including Sahiwal and Port Qasim coal projects should use at least 20pc of Thar coal by blending it with imported coal to save foreign exchange and facilitate indigenous resource utilisation. He said the cost of per unit power production from Thar coal block-II would reduce significantly after phases II and III became operational.
He said the first project now in final stage was based on subcritical technology but the company had now asked the government to allow super-critical technology for all future projects in phases II and III to achieve 3pc greater efficiency than subcritical plants.
Published in Dawn, November 12th, 2018