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Lucrative tariff: PakGen considering switching 365MW power plant to coal

Lucrative tariff: PakGen considering switching 365MW power plant to coal

ISLAMABAD: What can be described as lucrative tariff offered by the Nepra recently, Independent Power Producer Pakgen Power limited is mulling to convert its furnace-fired 365 MW power plant into coal-fired to get benefit of one of the most lucrative coal based tariff.

The Nepra has, recently, announced a lucrative tariff for power generation from coal-fired plants to attract fresh investment in power sector.

In its application to Nepra, PakGen has written that due to rapid oil prices rise in last few years’ furnace oil based IPPs have become expensive. The company claimed that the government was keenly looking to convert the existing oil-fired power plants into coal-fired.

The IPP has attached a letter written in 2011 which generally advise power producers to switch to cheaper fuels. Established under 1994-power policy, it is an independent power producer, owned by Nishat Group, with assets worth Rs500 billion. According to worksheet attached with the application, the cost of the project situated at Mehmood Kot, Kot Addu, in Punjab has been estimated $248 million while the project completion time is 36 months. The company has sought a tariff of Rs8.3811 per kilowatts or 8.634 cents per kilowatt.

Elaborating the total tariff, the breakdown shows Rs 5.1666 as energy purchase price, Rs 1.6164 as new capacity charge, Rs 1.1160 as existing capacity charges and total capacity charges at 85 percent Rs 3.2146 per kilowatts hour.

According to the application company indicated an average saving of Rs 9.75 per kilowatts during first ten years and Rs 11.77 during 11-25 years. In its application the petitioner has asked the Nepra to treat the power producer as coal-fired power generation plant and apply the tariff of imported coal, accordingly.

Nepra has recently offered a lucrative tariff plan for the local and imported coal based power plants. In order to lure foreign investment in power sector, the regulator, reportedly on the directions of government relaxed key parameters of plant quality and efficiency, project cost and operation and maintenance expenses and also ignored a legal requirement, in the new tariff announced this year.