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ISLAMABAD: Sindh Engro Coal Mining Company (SECMC) is said to have shown willingness in extending support for the development of 330 MW mine mouth Thar coal project for power offtake of K-Electric Limited.

This was revealed by KE, in response to the letter of Managing Director PPIB in which the former had inquired about the status of acquisition of land, and feasibility study for the project.

According to KE, SECMC was approached for the arrangement of land parcel and Thar coal needed for the development of project.

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A meeting between the senior leadership of KE and SECMC was also held in December 2023, in which SECMC’s management showed its willingness in extending its support for making the required arrangements of the land parcel and the quantities of Thar coal needed for the project.

“We have been informed that SECMC is required to follow its due internal approval processes, after which it will be able to provide the land co-ordinates for the project. Since this process is expected to take at least two to three months, therefore, KE has requested the support of PPIB and Ministry of Energy (Power Division), to expedite this allocation process,” said Shahab Qadir Khan, Chief Strategy Officer.

The PPIB has decided to conduct International Competitive Bidding (ICB) for an Independent Auction Administrator (IAA) for the 330 MW Thar coal power project for sale of electricity to K-Electric (KE) as a private power purchaser without GoP guarantee.

M/s Siddiqsons Energy Limited (SEL), the developer of 330 MW Thar coal power project, was accorded eight extensions in Financial Closing (FC) date (last of which expired on December 31, 2021), through amendments to Letter of Support (LoS).

However, upon repeated requests to fulfil necessary formalities doubling the existing Performance Guarantee to $ 7 million and submission of FC Date extension fee ($ 165,000) to obtain an amendment to LoS and extend its FC date, SEL failed to fulfil the requisite requirements and also failed to achieve FC within its extended FC deadline of December 31, 2021. Subsequently, the PPIB on August 2, 2022 encashed the Performance Guarantee amounting to $ 3.5 million under and in accordance with terms and conditions of the LoS.

In the meantime, in order to formally terminate the LoS and discuss the proposal of SEL for sale of electricity to K-Electric as new power purchaser, an agenda was submitted to the Board of PPIB in its meeting held on August 17, 2023.

During the meeting the Board deliberated on termination of the LoS, recovery of HVDC LDs and SEL’s proposal for continuation of development of the project with KE as new power purchaser.

Accordingly, PPIB Board constituted a Special Technical Committee (STC) with certain Terms of Reference (ToR)s which were primarily focused on analysing the pros and cons of sale of electricity from SEL to KE, instead of CPPA-G, as power purchaser.

The STC held its meetings on September 4, 2023 and September 28, 2023 respectively. NTDC reassessed and submitted a report on its system requirements, power evacuation and transmission capability, with KE as power purchaser of SEL, while keeping in view the impact on HVDC and existing transmission network and its utilization.

Further, CPPA-G in coordination with KE, prepared a detailed report on induction of SEL’s project in KE system, its impact on the basket price of CPPA-G and KE separately, impact/savings on account of KE’s Tariff Differential Subsidy (TDS), along with cost benefit analysis while keeping in view different scenarios for SEL’s project.

The sources said STC has finalized its report while keeping in view the analysis of CPPA-G and NTDC. Summary of findings are as follows: (i) in absence of FC, PPA is not effective in its entirety, due to which HVDC LDs is not likely recoverable; (ii) NTDC’s latest/updated opinion, even if the PPA is not effective in its entirety, is that NTDC has performed its contractual obligations in accordance with PPA, therefore LDs should be recovered; and (iii) SEL adopted NEPRA’s upfront tariff in 2018, and since then, market dynamics have changed significantly. Now, NEPRA has downward revised tariff parameters including EPC, development costs, and RoE based IRR from 18% to 14% (as in case of Gwadar Power Project).

Keeping in view ToRs as set out by the PPIB Board and directives issued by SIFC, the recommendations of the STC’s report are as follows: (i) to proceed with ICB to be conducted for a 330 MW Thar Coal Power Project for sale of electricity to KE without GoP guarantee, wherein SEL may also participate subject to settlement of HVDC’s LDs issue with NTDC; (ii) LoS already issued to SEL by PPIB be cancelled/terminated; (iii) PPIB to carry out bidding on behalf of KE as IAA and may approach its Board to seek approval to initiate ICB process; and (iv) prior to conduct bidding a detailed feasibility study shall be carried out including power evacuation and system impact study (technical and commercial) for supply of power to KE system.

According to sources, during the analysis of CPPA-G and NTDC the sixth meeting of the Executive Committee of the Special Investment Facilitation Council (SIFC) was held on October 23- 24, 2023 at Prime Minister’s Office, wherein it has been inter-alia decided that the off-taker of 330 MW SEL coal power project has been changed from CPPA-G to KE, without any government guarantees; and PPIB has been tasked to conduct a round of Competitive bidding on behalf of KE.

Copyright Business Recorder, 2024

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