ISLAMABAD: Siddiqsons Energy Limited (SEL) has approached Prime Minister Shehbaz Sharif against PPIB’s decision of encashment of guarantee and resolution of other issues.
Prime Minister Office (PMO), in a letter written on June 23, 2022 to Secretary Power has sought report from Power Division on the issues mentioned by the power company within three days.
The SEL was granted Generation License for development of 350 MW imported coal power plant at Port Qasim, Karachi and opted for upfront tariff on imported coal in July 2015 and PPIB Letter of Support (LoS) was acquired in Aug 2015. Later, upon the advice in Feb 2016 of the GoP, SEL was requested to change the primary fuel from imported coal to local coal. The company obtained first amendment and extension in the LoS in Oct 2016 and obtained the tariff for local coal at Port Qasim, Karachi.
Upon advice of the GoP, the Company decided to relocate the project from Port Qasim to Tharparkar district and obtained relevant approvals. NEPRA announced the new upfront tariff regime in July 2017.
SEL applied for new lowest upfront tariff which was approved by authorities in Jan 2018. This led to the execution of project documents and SEL successfully executed Power Purchase Agreement (PPA) and Implementation Agreement (IA) in March 2018.
According to Chairman of the Company, Tariq Rafi, once moved to Thar coal, SEL faced many challenges specifically in signing of Coal Supply Agreement (CSA), Land Lease Agreement (LLA) and Water Use Agreement (WUA). These documents were signed in December 2019.
The Company was due to achieve project Financial Close by February 2020. However, it was delayed due to the pandemic (Corona Virus) around the globe, as well as, in Pakistan which has affected all parties involved in achieving Financial Close. Therefore, the final approvals process of the lenders was halted (including China Development Bank’s approval to United Bank Limited).
The company claims that it has already invested over $ 20 million as equity on the development of the project and is still determined to develop the project to assist the country in its efforts to overcome the energy crises and have the cheapest electricity at the National Grid System by using indigenous coal from Thar Coal Mine.
SEL maintains that its project has great potential with excellent fundamentals being in the top Merit Order (within top 3). Thar coal plant implies a saving of approximately $ 230 million per annum on account of coal imports. SEL will ensure savings of $ 48 million per annum through average Thar coal price reduction.
The current fuel cost element of imported fuel/fossil fuel ranges from Rs. 30 kWh to Rs 40 Kwh. However, utilizing Thar indigenous coal the fuel cost element of this plant would be Rs 2.5/ KWh. This shall also help in reducing import of high quantity fuel, which is presently causing load shedding in the country.
Tariq Rafi, in his letter informed the Prime Minister that despite the savings in foreign exchange remittance and high merit of the project, the lenders have shown their inability to fund the project for achieving financial close due to the huge circular debt of power sector which now has accumulated to Rs 2.5 trillion.
“In order to save the project and remove concerns of the lenders for the repayment of project debt, the Company initiated discussion with K- Electric to supply cheap electricity from Thar coal plant to KE network. Under these arrangements the lenders are comfortable and willing to arrange debt financing required for the project. All other dynamics of the project shall remain same except the off-take of cheapest electricity will be supplied to residents of Pakistan through K-Electric network,” he continued.
Chairman SEL has sought support from PMO for the following: (i) direct NTDC to sign contract with the company for the dispersal of electricity from plant to K-Electric transmission system; and (ii) direct PPIB to hold encashment of project guarantee until the Company achieves project financial close with KE and bank guarantee once the financial close is achieved.
Copyright Business Recorder, 2022