ISLAMABAD: The private sector investors on Monday sought policy clarifications before committing long-term investments for Liquefied Natural Gas (LNG) based power plants and pressed for allowing smaller plants to facilitate putting together fresh investments.

They were attending a public hearing arranged by the National Electric Power Regulatory Authority (Nepra) on a petition filed by the government for upfront tariff for LNG power projects. The government seeks to set up 3,600MW of LNG power plants in Punjab in the first phase to end load-shedding by 2017.

Some of the investors expressed their inability to initiate 800MW LNG power plants in Punjab. They also said it would be difficult to undertake LNG power plants without gas supply framework document. Majority of the investors also urged Nepra to review per megawatt cost, internal rate of return (IRR), interest during construction, operation and maintenance cost, encourage small power plants and ensure guaranteed fuel supply.

Raziuddin, Chief Executive of KP Oil and Gas Development Company while speaking on behalf of the KP government said the setting up of LNG power plants should not be for a specific province. He said that entire Pakistan should be opened for investors to set up LNG power plants. “It is not clear about pricing, guarantees and who will bring LNG in Pakistan”.

Former Member Energy Planning Commission Shahid Sattar said that no LNG power plants would work unless and until circular debt issue was resolved. He said that assumed price of LNG at $12 per Million British Thermal Unit (mmbtu) was higher against existing delivered price of $7 per mmbtu in other countries. He said that power market should be opened and signing 30 years contracts would be against open market concept.

A representative of General Electric (GE) said that the regulator should announce three separate tariffs for 250MW, 400MW and 800MW LNG plants. He said that efficiency rate of 250MW combined cycle plant was 52 to 53 per cent, 400MW 56pc and 800MW operated at 58pc efficiency. He said that alternative fuel for LNG plants was diesel.

At Nepra hearing they sought gas supply framework before committing long-term ventures

A representative of PakGen Power Farhan Lodhi said that the government should announce upfront tariff for small power plants with 250MW capacity. He said it would take six months for financial close and would be implemented in 12 months. He also said the 800MW power plants projects were too big to implement as few parties in Pakistan would be interested in such big projects.

Majority of the investors said the proposed per megawatt cost at $1.1 million and 15pc rate of return were at lower side. For encouraging investors to install 3,600MW power plants in load centres of Punjab the rate of return should be set at 17pc.

Some investors also asked the government to guarantee the supply of LNG for power plants. They further said that project sponsor would have to open Escrow account worth $34 million and this amount should be treated as equity for rate of return. They said that government should sign gas supply framework first to undertake the projects.

Nepra will decide whether the $12 per mmbtu LNG price and the cost of Escrow account are justified. It will also assess 15pc internal rate of return and 1.35pc insurance cost of the engineering, procurement and construction (EPC) contract.

The petition for upfront tariff was filed by Private Power Infrastructure Board (PPIB) for setting up of proposed 3,600MW LNG power projects near load centres. The Cabinet Committee on Energy (CCoE) headed by the prime minister had decided last month to set up regasified liquefied natural gas (RLNG) power plants near Bhiki (Sheikhupura), Balloki (Kasur) and Haveli Bahadar Shah (Jhang).

Exact sites and power plant capacities at each location will be finalised by NTDC considering the feasibility, supply demand requirements, power evacuation and system studies. Furthermore, the CCoE directed the NTDC to ensure investment of approximately $38 million in providing grid connectivity to the three sites selected for RLNG based power plants.

Acting Managing Director PPIB Shah Jahan Mirza said that 3,600MW capacity power plants which will be established on imported LNG by government or government-owned public sector entity.

These plants will be established by the private sector for which the government had already announced LNG policy that allowed anybody to import LNG and set up power plants in any part of the country.

He said the government had done the working on three prices i.e. $10, $11 and $12 per mmbtu after re-gasification, transportation losses etc. “I think even today between $9 and $10 per mmbtu price is reasonable if we start with the LNG landed price of $7 to $8 per mmbtu,” Mirza added.

PPIB has recommended agreement for 20 years but ministries of petroleum and water and power have recommended 15 to 20 years. He said that the life of plants will be 30 years, requesting Nepra to look into this issue.

The Nepra after listening to all gave seven more days for more comments saying it would announce upfront tariff after taking into accounts all suggestions and comments of stakeholders.

Published in Dawn February 24th , 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play