Gas supply interruption: ECC delays decision on liquidity damages for IPPs

Directs petroleum, power secretaries to consult with oil minister

ISLAMABAD:

The Economic Coordination Committee (ECC) has put off its decision on a proposal for paying liquidity damages to the power producer for interruption in the supply of re-gasified liquefied natural gas (RLNG), officials say.

The proposal came in the backdrop of a long-term LNG supply deal between Pakistan and energy-rich Qatar. Power producers are the major consumers of RLNG whereas state oil marketing company Pakistan State Oil (PSO) imports the gas from Qatar.



The Ministry of Water and Power had tabled a plan before the ECC in a meeting on March 17, suggesting that in case of delay or interruption in RLNG supply during the open-cycle operation of power plants, liquidity damages imposed by the power producer would be paid by the gas supplier.

The ECC, however, did not give a decision and directed the secretaries of water and power and petroleum and natural resources to hold a consultative meeting with Petroleum Minister Shahid Khaqan Abbasi.

The water and power ministry pointed out that in line with the earlier ECC decision, the Private Power and Infrastructure Board had invited bids for 1,000-megawatt RLNG-based independent power plants (IPPs) through national and international media on February 10, 2016.

Bidders were required to make offers by March 22, 2016 and start open-cycle operations by April 15, 2017 and combined-cycle commercial operations by February 15, 2018.

In a pre-bid meeting on March 8, 2016 held to respond to the queries of prospective bidders, most of them called for extending the deadline for bid submission, open-cycle operation and commercial operation besides raising concern over other issues.

Two days later, government officials met at the Ministry of Water and Power to take up the concerns raised by the bidders. Keeping in view the time constraints following the publication of advertisements, they agreed to allow some changes.

According to the agreement, the bid submission date would be extended to April 5, 2016, the deadline for open-cycle operations would be extended to April 30, 2017 and the commercial operation date would be pushed to March 2, 2018.



It was also agreed that if the supply of RLNG was interrupted during the open-cycle operation, liquidity damages imposed by the power producer would be paid by the gas supplier.

Meeting participants told the ECC that its chairman Ishaq Dar, who is also the finance minister, had accorded anticipatory approval to the first three proposals but he did not agree on payment of liquidity damages.

The ECC approved extension in the date for submission of bid documents for the setting up of 1,000MW LNG-based IPPs to April 5. However, it rejected the proposal of liquidity damages payment by the gas supplier.

Published in The Express Tribune, March 27^th, 2016.

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