ISLAMABAD: Prime Minister Office (PMO) has convened a meeting on Friday (today) to discuss the issues of 330-MW coal-fired power plant of Siddiqsons Energy Limited (SEL), after the company sought Prime Minister’s support against a decision of PPIB, well informed sources told Business Recorder.
The meeting to be presided over by SAPM Jehanzeb Khan will be attended by the senior officials of concerned Ministries/ Organisations.
Recently, PPIB BoD, headed by Secretary Power decided that court case filed by SEL should be vigorously pursued to vacate stay order and subsequent encashment of bank guarantee. The PPIB Board headed by Secretary Power Division took this decision on June 21, 2022, just two days before Prime Minister Shehbaz Sharif sought report on a SEL’s letter, in which the company wrote the entire history of its project, issues and future line of action.
According to sources, Managing Director, PPIB, Shah Jahan Mirza whose contract expired last month gave a brief history of the project that SEL was granted final (tenth) extension up to December 31, 2021 by PPIB Board in its 134th meeting and SEL was required to submit double the amount of its existing doubled Bank Guarantee, as well as, payment of requisite fee. Also, SEL was required to pay to CPPA-G by way of Liquidated Damages (LDs), a pro-rata amount equivalent to Transmission Service Charge (TSC) payable by NTDC to Pak Matiari-Lahore Transmission Company Limited.
The PPIB has claimed that on account of series of non-compliances on part of SEL, it issued Demand Notice to issuing Bank for encashment of Bank Guarantee and SEL obtained stay order from the Court of District Judge, Islamabad and the matter is now under litigation.
SEL has now expressed intention to sell electricity to K-Electric instead of national grid and solicited support of PPIB. Also, SEL intends to settle the matter through negotiations while keeping the sub-judice matter pending. SEL has also requested return of its Performance Guarantee (PG) based on the precedence of other projects. The precedence does not seem relevant in case of SEL, as every project has its own circumstances, security and documentation.
The Chairman/ Secretary Power opined that if a court stay can be granted against PG encashment then there is a need to redraft the PG document as it is the only deterrent which Government of Pakistan (GoP) has for implementation of projects. On an enquiry about the details of stay order and follow up actions taken by PPIB Law Section, the Board expressed grave concern over delay in getting stay order lifted.
Representative Finance Division added that auditors have also observed increase in litigation which has not been pursued. The Board, thereafter, decided that PPIB Law Section shall not be paid performance bonus for this year.
Considering recommendations of Project’s Committee, the Board decided that the court case filed by SEL should be vigorously pursued and once the stay order is vacated, bank guarantee of SEL should be encashed.
The Board also decided that those officials of PPIB who deliberately got the case delayed in court in connivance with the company be penalized.
The company, in its letter to Prime Minister, has claimed that it was due to achieve project Financial Close by February 2020. However, it was delayed due to the serious pandemic (Corona Virus) around the globe, as well as, in Pakistan which has affected all parties involved in achieving Financial Close. Therefore, the final approval process of the lenders has been 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 provide the cheapest electricity to the National Grid System by using indigenous coal from Thar Coal Mine. The SEL argues that its project has great potential with excellent fundamentals being a top Merit Order (within top 3). Thar coal plant implies a saving of approx. $ 230 million per annum on account of coal imports.
The company also says that it will bring a 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.
The Company’s CEO, Abdul Rahim, in a letter to SAPM on Government Effectiveness, Jehanzeb Khan has requested that in order to save the project and remove concerns of the lenders regarding the repayment of project debt, the Company has initiated a discussion with K- Electric to supply cheap electricity from the Thar Coal plant to KE network. Under these arrangements, the lenders are comfortable and willing to arrange the debt financing required for the project. All other dynamics of the project shall remain the same except the offtake of the cheapest electricity will be supplied to residents of Pakistan through K- Electric network.
In view of the foregoing and to ensure that the high merit and cheap electricity generation plant at Thar Block II is implemented, the Company has requested the SAPM to support the following: (i) provide a robust mechanism which enables the transition of the company from CPPA to KE, utilising the existing agreements, consents and approvals, in a manner which is most optimum ;(ii) direct NTDC to sign a contract with the company for the dispersal of electricity from the plant to K-Electric transmission system; and (iii) direct PPIB not to encash the LoS performance guarantee until the company achieves project financial close with KE and returns bank guarantee once the financial close is achieved.
Copyright Business Recorder, 2022