ISLAMABAD: Water and Power Development Authority (Wapda) has sought levelized tariff of Rs10.3 (Cents 6.2440) per unit for 969MW Neelum Jhelum Hydropower Project for a period of 30 years.
National Electric Power Regulatory Authority (Nepra) is scheduled to hear tariff petition of Neelum Jhelum Hydropower Company Private Limited (NJHPC) on June 21, 2021 to determine tariff for the project. Construction period has been assumed as 10.5 years (125 months) from the date of financial closing/ notice to proceed.
The company has assumed exchange rate of Rs165/ USD whereas Return on Equity (RoE) has been claimed as 10 per cent as IRR. The proposed debt-equity ratio is 74:26 based on Foreign Relent Loans (FRL), Cash Development Loans (CDL) by GoP and local commercial loans. The interest rate on FRL ranges from 12 per cent to 15 per cent, for CDL it ranges from 10.65 per cent to 11.79 per cent and for local commercial loans 6 month Kibor + 113 bps is used. Debt repayment period has been assumed as 20 years (semi-annually).
The company which has established the project has requested that the uncovered amount of Rs30.111 billion on account of tariff differential of Rs2.8137 per unit for the period from July 4, 2018 to October 16, 2020 may be allowed to be recovered in monthly equal instalments.
The tariff proposal has been based mainly on the following ground: (i) the term of the tariff determined is near to completion; (ii) to allow Water Use Charges (WUC) at Rs.1.10/kWh as approved by CCI or as agreed between GoP & GoAJK; (iii) project being substantially completed, all project loans have been closed and since a DSL amortisation schedule has been finalised; therefore the relevant tariff components be modified accordingly; (iv) the insurance component has to be modified because the CAR insurance has expired and Operational phase insurance has been obtained; (v) since Kishan-Ganga impact in the hydrology is now clearly known therefore it has to be accounted for in the generation estimates;(vi) the impact of increased compensation and environmental flow from 9 to 20 cumes as per direction of the GoAJ&K and GoP needs to be considered;(vii) ROE and ROEDC, which was not allowed previously may be considered in terms of Tariff Rule 17(3)(ii) & (iii) as reproduced below; (viii) tariffs should generally be calculated by including depreciation charge and a rate of return on the capital investment of each licensee commensurate to that earned by other investments of comparable risk; (ix) "tariff should allow licensees a rate of return, which promotes continued reasonable investment in equipment and facilities for improved and efficient service;" and (x) indexations, adjustments, and escalations to be accounted for according to the formula provided in Sub Clause 70.3 of COPA Part IIB of NJHPP Contract Document, agreed at the time of signing being in line with Pakistan Engineering Council (PEC) guidelines, which is also compatible with Nepra 3-stage Mechanism for determination of tariff for hydro power projects.
Copyright Business Recorder, 2021