ISLAMABAD, Nov 19: The Karachi Electric Supply Corporation (KESC) has sought permission from the federal government for setting up a 350-mw gas-fuelled power project in the Korangi locality to partially offset the increasing power shortage in the city.
"The KESC is at present facing an acute shortage of power which is likely to grow in excess of 1,000-mw in two to three years," an SOS sent to the federal water and power secretary by KESC Managing Director Brig. Tariq Saddozai says.
The KESC request comes hot on the heels of a recent refusal by the National Electric Power Regulatory Authority (Nepra) to bypass procedures and legal requirements to give preference to a US-based investor for building a 200-mw power plant in Karachi on an emergency basis.
The KESC has proposed to set up a combined cycle project on the premises of the Korangi Thermal Power Station (KTPS) on the basis of a recently updated study. The project would cost $240 million.
"The study has worked out the unit cost of generation to be US cents 3.38 when implemented in the public sector as against US cents 5.05 when undertaken in the private sector. Thus, a substantial benefit will accrue to KESC mainly due to softer loan terms and lower return on equity," wrote the KESC chief to support his contention that the power utility should itself undertake the project instead of involving the private sector.
The KESC is at present importing power from Wapda to meet the shortfall, but Wapda would not be able to continue this arrangement beyond the year 2005 due to growth in its own system.
The KESC "has no other sources of power to fall back upon, as no hydel or other alternative energy sources exist in the KESC system". It is, therefore, essential that the KTPS project of 350-mw capacity is implemented on a priority basis to plug the demand-supply gap.
The utility has also indicated that it is in possession of various infrastructure facilities like land, water, natural gas supply and transmission lines, etc., that will make the task of implementing the project that much easier.
The project can be implemented in five years compared to six or more if undertaken by the private sector because of problems generally faced in the financial closing of projects this big.
About project funding, the KESC has informed the government that it has already included the project in the Yen Loan Package of the government of Japan which is currently in the process of revival.
As such, the federal government should also prioritize $240 million cost of the project in the Yen package so that in case of KESC's privatization, the matter could be resolved between the two governments.
Nepra had asked the government to recoup over 400-mw of KESC's derated capacity or hand over to the utility two gas turbines of 300-mw gifted recently by the UAE government to Pakistan. They would take even shorter time in installation and commercial operations or the KESC should say it in writing that it could no more set up power plants on its own.
Any attempt to bypass procedures or legal requirement in the interest of expediency or driven by a preference to a particular investor would lead to an outcome similar to that of the IPPs under the 1994 Power Policy, Nepra chairman had pointed out.
Nepra had said that the KESC was an integrated utility, providing generation and distribution services. Its integrated status preconditions that it would contract for generation capacity if it was not able to enhance its own capacity and found alternative sources of purchase of power less costly.
Hence, any request for enhancement of generation should therefore be initiated by the KESC, clearly demonstrating its constraints within further extrapolations of existing capacity and future projection of load growth.
