KARACHI: The National Electric Power Regulatory Authority (NEPRA), while rejecting the demand of K-Electric (KEL) for the restoration of previous Multi Year Tariff (MYT), Thursday notified Rs12.81/kwh new MYT for the next 7-years (FY 2017-23) which is marginally up from the tariff of Rs12.77/kwh determined in October 2017.
One key positive development for KEL seems to be the removal of regulatory hurdles, clearing the way for the awaited deal with Shanghai Electric for the sale of Abraaj’s stake in the company.
K-Electric (KEL) was seeking a five-year MYT Rs16.10/kWh extension for power generation in its two 420 megawatts plants since the power utility claims it has spent over Rs1.5 billion on their resuscitation.
The decision of NEPRA regarding the MYT may jeopardise its investment in major projects including 900 MW project being set up at Bin Qasim port area, the sources said.
In its application filed with NEPRA, K-Electric has recommended the useful life of unit-I and unit-II should be extended to August 2023 and August 2024.
K-Electric filed a petition to NEPRA for Integrated Multi-Year Tariff (IMYT) in March 2016, before expiration of its existing tariff in FY 2015-16, requesting a determination of MYT for 10-years beginning FY 2016-17 with an upward revision in MYT from Rs15.5/kWh to Rs16.10/kWh, an increase of Rs0.66/kWh.
The regulator, in its decision in March 2017, determined a tariff of Rs12.07/kWh and reduced the number of applicable years to 7 years. Dissatisfied, KEL filed for a review which resultantly led to an upward revision in tariff to Rs12.77/kWh in Oct-2017. However, KEL again filed for a review, the decision for which was granted on 5 July, Thursday.
In the revised figure, adjustment was made in all components of tariffs including generation, transmission and distribution.
K-Electric has not been allowed any provision on account of the Doubtful debts in the tariff, however, Bad Debts written off @ 1.69 per cent of K-Electric’s assessed sales revenue has been allowed in the base case, the analyst said. The amount of write off shall be approved by the KE BoD which shall certify that KE has made all best possible efforts to recover the amount being written off.
The analyst said it will be minimal impact on the stock as there is no material change in the decision granted today compared to the decision rendered in October 17.
K-Electric was going to set up in 900 MW project in Bin Qasim area with the cost of $950 million and initial work had already been completed and such decision may halt its further investment in the projects, the analyst said
unfortunately the regulator did not consider a single argument put forward by the intervener(s) against the petition of K Electric otherwise the tariff would have been much lower.