Legal arrangements for more power, gas supplies to KE stalled

Published December 5, 2020
The legal arrangements for additional electricity and gas supplies to K-Electric from the national networks have been stalled owing to non-settlement of over Rs253 billion receivables of the National Transmission and Dispatch Company (NTDC) and the Sui Southern Gas Company (SSGCL). — AFP/File
The legal arrangements for additional electricity and gas supplies to K-Electric from the national networks have been stalled owing to non-settlement of over Rs253 billion receivables of the National Transmission and Dispatch Company (NTDC) and the Sui Southern Gas Company (SSGCL). — AFP/File

ISLAMABAD: The legal arrangements for additional electricity and gas supplies to K-Electric from the national networks have been stalled owing to non-settlement of over Rs253 billion receivables of the National Transmission and Dispatch Company (NTDC) and the Sui Southern Gas Company (SSGCL).

Informed sources said managements of both the public sector companies — NTDC and SSGCL — had declined to sign the power purchase agreement (PPA) and gas supply agreement (GSA), respectively, with K-E until the clearance of their dues.

Under a decision of the Cabinet Committee on Energy (CCoE) of June, power supply from national grid has to be increased to 1,400MW with additional gas supply of about 150MMFCD to KE. KE and SSGCL have no GSA in place for existing gas supplies of about 200MMFCD.

The SSGCL management and board of directors want to have some kind of guarantee from the federal government or a payment plan from KE for the payment of Rs103bn before entering into GSA. KE is contesting the amount and claims a principal payable of about Rs13bn to SSGCL.

The NTDC management also wants payment of its Rs150bn dues before signing PPA for additional power supply.

NTDC, SSGC want to receive Rs253bn dues from power utility before signing agreements for additional supplies

Informed sources said the KE management had been engaged with various legal and political authorities over the past few days to resolve the issue, but the efforts were hampered by non-availability of some important officials due to Covid-19 limitations. Another formal meeting is expected next week between the government and KE officials on the subject.

At a press conference a few days ago, federal Planning and Development Minister Asad Umar, who also heads the CCoE, had observed that the resolution of K-E issues had become inevitable; otherwise its receivables and payables would add Rs421bn to circular debt.

Sources close to KE said the SSGCL dues were contentious because it involved about Rs90bn compound interest compared to the principal amount of Rs13bn. They argued that if KE had to pay compound interest, then it should also be treated on the same principle on payment of its dues from government entities.

Special Assistant to the Prime Minister on Power Tabish Gohar had recently proposed settlement of these dues through some sort of arbitration or a court judgement for an equitable solution.

In October, the Pakistan LNG Limited (PLL) and K-E had signed a heads of agreement for supply of 150MMCFD regasified liquefied natural gas (RLNG) to 900MW Bin Qasim Power Station-III (BQPS-III) power plant. The heads of agreement was supposed to be followed by a gas supply agreement in December or January. The PLL has to use SSGCL network for gas supply to KE.

The BQPS-III will have two units, expected to be commissioned in March 2021 and November 2021, respectively. The PLL will supply up to 150MMCFD RLNG to these power plants.

According to the details provided by KE, the BQPS-III is a hi-tech and state-of-the-art combined cycle power plant located inside Bin Qasim Power Complex.

The plant will be run on dual fuel as it may be fired on RLNG or HSD. The power plant will improve overall fleet efficiency, availability and reliability.

The federal government had offered to increase power supply to KE from the national grid to 1,400MW. In 2021 the NTDC will provide 450MW additional electricity to KE.

The non-settlement of issues leading to delay in signing of GSA and PPA could become a major source of power shortage and outages in Karachi next summer.

Under the understanding reached between KE and the government, the Central Power Purchasing Agency/NTDC (CPPA/NTDC) are to enhance supply to KE from national grid by 1,400MW on urgent basis from coming nuclear power projects in the city and coal-based power projects at Port Qasim. Of this, about 500MW has to flow from K-2 plant expected to start production by April 2021.

This will also require additional transmission facilities to be developed through three different locations — Jhimpir, Karachi West and Port Qasim-Dhabeji.

The federal government will also support the issuance of tariff notification for Datang Coal Power Limited (2x350MW) at Port Qasim. The KE has to develop transmission line and related infrastructure to its Bin Qasim RLNG plants while the government has to ensure diversion of 150MMFCD of RLNG at Ogra-notified rates.

Published in Dawn, December 5th, 2020

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