ISLAMABAD: Kot Addu Power Company Limited (KAPCO) is reportedly in distress due to a prolonged delay in extension of ten years in its generation licence, saying that due to the uncertainty/ delay, the company’s financial statements may be qualified by its external auditors for the financial year ending June 30, 2022.
The company’s concerns have been communicated by its Chief Executive, Aftab Mahmood Butt, in a letter to National Electric Power Regulatory Authority (NEPRA).
Generation licence of KAPCO was set to expire on September 21, 2021. The company, in accordance with applicable regulations, duly filed an application before the NEPRA for renewal/ extension of its generation licence for a period of ten years.
The regulator provisionally allowed KAPCO to continue to generate and supply electricity to the Power Purchaser/ national grid under the obligation of its existing generation licence pending its final decision. NEPRA sought comments from different stakeholders, and key stakeholders (including NPCC, NTDC, MEPCO, etc.) gave favourable comments for extension of the generation licence.
A public hearing was conducted by NEPRA on March 31, 2022 on the KAPCO’s generation licence application.
The power company has already generated and supplied electricity well in excess of the forecast of the Indicative Generation Capacity Expansion Plan (IGCEP) during the current period due to system requirements which further strengthens the critical importance of its power plant in the system.
Some banks withdraw credit lines: Kapco expedites efforts for renewal of its PPA
According to the Chief Executive, notwithstanding KAPCO’s desire to enter into commercial operations it is in the interest of the Power Purchaser/ System operator/ GoP/ NEPRA that the generation licence be renewed, for the following reasons: (i) KAPCO has ten multi-fuel fired Gas Turbines, five Steam Turbines, and ten Heat Recovery Steam Generators (HRSG); (ii) KAPCO’s Power Plant also consumes LSFO produced by Attock Refineries Limited (ARL). This not only provides backup fuel in case of gas shortage, but also ensures continuation of ARL operations;(iii) KAPCO’s Power Plant is situated at a key location to the National Grid with 12 transmission lines, six each on 132 KV and 220 KV interconnected through having a transformation capacity of 500 MVA;(iv) power complex has a maintained black start capability to support quick recovery in case of transmission collapse.
The capability has been demonstrated successfully over the years and in the recent blackouts;(v) power complex has one of the most extensive fuel oil storage facilities in Pakistan of 156K MT of LSFO and 40M litres of HSD, which ensures fuel/ energy security for the country;(vi) A 32-km dedicated 10-inch diameter fuel oil pipeline from PSO’s Lalpir Depot to the power complex with a capacity of 3,800 MT per day.
The power complex also has a facility for direct decantation of road tankers as well;(vii) six fuel oil treatment plants (the largest facility in Pakistan) to treat furnace oil for burning in the gas turbines; and (vii) there is a well-connected gas supply network through three pipelines - two 16-inch pipelines from SNGPL network have 400 MMSCFD and one 12-inch pipeline from Dhodak with a capacity of 80 MMSCFD.
The CE maintained that it is a recorded fact that NTDC, NPCC and MEPCO have stated that KAPCO generation is critically required for support of 132 KV & 220 KV grid system. KAPCO Power Complex is being dispatched at high levels to meet NPCC demands, ensure grid stability and to alleviate the level of load shedding in the country.
He claimed that delay in extension of generation licence is causing considerable hardships for company. It has obtained credit lines worth billions of rupees to bridge finance the payment defaults of the Power Purchaser and to support the system.
Some of KAPCO’s lending banks have withdrawn credit lines and some have reduced their credit lines. Standard Chartered Bank and Habib Metropolitan Bank have recalled their banking facilities on account of the uncertainty and non-renewal of the generation licence and have advised KAPCO to repay their respective facilities by the end of June 2022, he said, adding that reduction in banking lines reduces the ability of KAPCO to support the System requirements.
The company has informed the regulator that cancellation/ withdrawal of credit lines will constrain KAPCO to require the Power Purchaser to settle outstanding receivables forthwith, which may lead to making a call under the GoP guarantee.
“Due to the uncertainty/ delay, KAPCO’s financial statements may be qualified by its external auditors for the financial year ending June 30, 2022. KAPCO is a KSE 100 index company on the Pakistan Stock Exchange having over 60,000 shareholders. A significant number of shareholders are small shareholders and it is especially incumbent on KAPCO to protect their interests,” Butt maintained.
KAPCO has also argued that qualification of financial statements will not go down well with the stock market price, lending banks and other stakeholders.
The power company said that inordinate delay in extension of the Generation Licence is a matter of grave concern for it. KAPCO is being dispatched at high levels during this period and the Power Purchaser/ System cannot afford disruption/ stoppage of power generation from the KAPCO’s Power Plant.
“In case of further delays and consequential revoking of facilities such as financing, fuel supply, human resource, licensing, statutory, it would be extremely difficult to recover operations at short notice,” he said, clarifying that KAPCO has provided all information/ explanations satisfactorily and NEPRA Authority under its mandate and obligation, needs to protect the interest of all the stakeholders in a timely manner.
Copyright Business Recorder, 2022
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