In a spirited defense, led by the Sindh government and supported by the private sector investors, vehemently contested the National Electric Power Regulatory Authority’s (NEPRA) proposal, to review the upfront tariff for the Thar coal, warning it could derail the entire investment climate in the sector, at a public hearing here on Tuesday.
The hearing was chaired by NEPRA Chairman Tariq Sadazai, along with all the four provincial members including the recently appointed member Punjab Saifullah Chattha. The hearing was jam-packed much to the surprise of NEPRA authorities as nearly all the major stakeholders have flown from Karachi to make their arguments.
Opposing the NEPRA’s move, Sindh Board of Investment Chairperson Nahid Memon said that the provincial government had made huge efforts to attract the investment in the sector. “The tariff reduction would be disincentive to the investors”, she said.
About the Ministry of Water and Power’s (MWP) comment on the expensive cost of water in Thar, she said that the ministry was trying to create an issue even though it was not an issue. Consultant for the Sindh BOI said that Thar had enough water for generating the planned initial 5,000 MW.
Sindh Engro Coal Mining Company Chief Executive Shamsuddin was of the opinion that NEPRA may save few million dollars by revising the power project costs but it will slow down investment in power sector.
Consultant for Sindh BOI, Sultan Farooq stressed that NEPRA should look deeper into the realities before revising tariff. He said that Sindh Engro Coal Mining Company despite backing of the provincial government, sovereign guarantee from federal government and pressure through Ministry of Finance managed to get loan at KIBOR plus 1.75 per cent from the local banks. Private sector investors would get loans at much higher rates and that should be carefully looked into before any revision.
Sindh Energy Department special secretary also stressed that the tariff should be maintained. He said that the MWP was trying to create a non-issue. He said that water study for the project was underway that would help settle different concerns.
Too much surprise of NEPRA chairman that nobody from MWP was attending the hearing, even though the ministry had submitted its comments and stressed revising the tariff by 15 to 20 per cent. “They have given good comments and should have also participated in the hearing”, he added.
Former Member Energy Planning Commission, Syed Akhtar Ali termed horrendous the rate of return of 30 percent on Thar coal based power projects and stressed for revising it on lower side as per international standard of 12 percent. He termed the excessive cost of generation as one of the primary reasons for the higher circular debt.
Representative of PPIB, Faqeer Ahmad said that the first mover’s risk has ended and the time has come to rationalize the tariff however, he said returns should market based.
It is important to mention that the upfront tariff for Thar coal based power plants was determined on July 9, 2014 which was subsequently notified by the Ministry of Water and Power on January 20, 2015.
The validity of the upfront tariff was two years from the date of its notification. The tariff expired on January 19, 2017. The levelised tariff for 330MW power plants on foreign financing was 8.5 cents for units and on local financing 9.5 cents per unit. For 660MW power projects, the notified tariff was 8.3 cents per unit for foreign financing and 9.5 cents per unit for local financing. The notified levelised tariff for 1100 MW Thar-coal fired power plants was 7.9 cents for foreign financing and 9.1 cents for local financing.
Ministry of Water and Power, in its comments stated that three blocks of Thar-coal are included in the CPEC and in order to provide economies of scale, each block must achieve a capacity of more than 15-20 million tons per annum which means generation of around 7,500-9,000 MW cumulatively. At present, tariff on Thar coal is available to projects of around 3,600 MWs.
