Hydel projects at LoI stage: SIFC directs PD to streamline issues, policy limits

ISLAMABAD: The Executive Committee (EC) of the Special Investment Facilitation Council (SIFC) has directed the Power Division that all hydel projects at the LoI stage from various provinces including Kalam Asrit 238 MW, Asrit Kedam 229 MW and 470 MW Lower Spatgah, be reviewed to streamline their issues and policy parameters in the working group.

Well-informed sources told Business Recorder South Korean companies have approached SIFC Secretariat and shared their concerns regarding delay in different approvals, which came under discussion at EC of the SIFC on October 23, 2023.

M/s Korea Southeast Power Co., Ltd (KOEN), the leading state-owned electricity generation company, operating around 10,000 MW with asset base of $ 15 billion in South Korea claims that it moved further to bring Foreign Direct Investment (FDI) of around $ 1.2 billion for the development of 229 MW Asrit Kedam Hydropower project and 238 MW Kalam Asrit hydropower project on BOOT basis located in Swat district of Khyber Pakhtunkhwa

Hydel power projects in KP: KOEN accuses Nepra of delaying feasibility stage tariff

The Korean company had sought intervention of Secretary Power for the issuance of Tripartite Letter of Support (TLOS) under Power Generation Policy 2015 by PPIB by June 30, 2023 to enable the projects to meet the deadlines to achieve COD by July 2029 in IGCEP-2022-31 and to avail the income tax exemption which is expiring on the said date.

The company had claimed that for the issuance of TLOS, Nepra is required to approve the feasibility stage tariff of the projects by end of May 2023. The Letter of Intent (LoI) for the 229-MW Asrit Kedam hydropower project and 238-MW Kalam Asrit hydropower project was issued on June 23, 2021 and April 24, 2018, respectively.

The feasibility study of the projects was approved by Panel of Experts (PoEs) in the second quarter of 2022 following which (in June 2022) both projects approached Nepra for grant of generation licences and feasibility stage tariffs. Both projects are also optimized in IGCEP-2022-31 with scheduled COD in July 2029.

M/s KHNP( Korea Hydro and Nuclear Power) which also intends to establish 470 MW Lower Spatgah has also approached different forums including SIFC and NEPRA for tariff determination.

Recently, the Korean embassy in Pakistan wrote a letter to the NEPRA and raised the issues of M/s KOEN saying the firm which has carried out its business in Pakistan successfully has concerns related to tariff approval indexation.

The power regulator has a different view on the claims of Korean company with respect to requested tariff.

According to Nepra, among the numerous issues presented in these tariff petitions, a critical question under NEPRAs evaluation is whether the tariff for these projects should be determined under the Cost Plus regime or the Competitive Auctions regime in accordance with the Nepra (Electric Power Procurement) Regulations, 2022.

Another important issue under Nepra’s examination is the IGCEP (Indicative Generation Capacity Expansion Plan) optimized parameters of least cost basis of these projects which among others is based on annualised cost of energy of US cents 4.56/kWh for Kalam and US cents 3.97/kWh for Kedam.

The requested costs in the tariff petitions are $489.33 million with levelized tariff of cent 7.13/kWh for Kalam and US$491.29 million with levelized tariff of US cent 7.11/kWh for Kedam.

These levelized tariffs at current SOFR and dollar exchange rate are approximately cent 8.88/kWh (Kalam Asrit) and cent 8.87/kWh (Asrit Kedam) and during debt service period of 12 years the tariff will be approximately cents 10.71/kWh for both projects.

According to the NEPRA, at current indices, both projects will have fixed capacity payment of close to US $ 200 million per year - which would be around $ 193 million during debt repayment period and $ 73 million per year for remaining 18 years.

The Korean embassy, has urged Nepra to pay attention to the company’s concerns and to provide feasible assistance to the 229 MW Asrit Kedam and 238 MW Kalam Asrit Hydropower projects initiated in Khyber Pakhtunkhwa, with the intent that economic cooperation between the two countries will be further enhanced through amicable resolution of challenges being faced by the company.

The EC of the SIFC has directed Power Division to present recommendations on all hydel power projects including the three to be established by M/s KOEN. The Power Division would include Secretary Water Resources and Chairman WAPDA in the working group.

Copyright Business Recorder, 2023