NEPRA likely to revise tariffs for renewable energy projects

They are eligible for concessionary financing under an SBP scheme

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) is reviewing for potential revision the upfront tariff of 49 renewable energy projects that are eligible for financing under a revised scheme of the State Bank of Pakistan (SBP), an official says.

The central bank has designed the revised scheme in an attempt to promote green banking to tackle the challenge of energy shortage and climate change being faced by Pakistan’s economy.

The power-sector regulator has undertaken a review of the upfront tariff determination for renewable energy projects and may change that if a company secures full or certain portion of debt under the revised financing scheme. Its tariff will be adjusted on the terms and conditions provided in the revised scheme.

According to Nepra, the cost of financing will be taken as 6% and any savings, if the cost is less than 6%, will be shared between the power purchaser and producer in the ratio of 60:40.

The SBP had unveiled the revised financing scheme in June 2016. The scheme was originally introduced in 2009. However, keeping in view its lack of attraction, the central bank revised the scope and financial mechanism to make it attractive for borrowers and financing banks/development finance institutions (DFIs).



According to the SBP, the objective of the revised scheme is to promote green banking to tackle the dual challenge of energy shortage and climate change. Among its salient features is that refinancing will be provided by the SBP through banks/DFIs at a fixed cost of 6% comprising 2% central bank rate of refinance and 4% bank spread.

Refinancing will be provided for a maximum of 12 years which include grace period of two years and debt servicing period of 10 years.

Refinancing will be given for renewable energy projects like solar, wind, hydel, biogas, biofuel, bagasse co-generation and geothermal.

Two categories in terms of project capacity have been covered. First category comprises projects in the range of one to 50 megawatts whereas the second category includes projects from 4 kilowatts to 1MW.

In the first category, maximum financing of Rs6 billion has been earmarked for a project. In the category-II, the financing size has been linked with equity participation and individual risks.

Financing under the scheme will be provided to projects achieving financial close between the date of issuance of the scheme and June 30, 2019.

The SBP, which sent the revised scheme to Nepra on August 9, 2016, told the regulator that concessionary financing would be provided through banks at 6%, which would translate into lower electricity tariffs for consumers and help promote clean energy.

The benefit would also be passed on to electricity consumers at the time of setting the tariff, it said while emphasising that the scheme would help promote utilisation of domestic resources of power generation.

For the projects whose upfront tariff had been approved after issuance of the scheme, Nepra stated in its determination that not only the tariff would be adjusted in line with the rates offered under the scheme, but also directed them to opt for financing under the scheme before opting for commercial and conventional loans.

Published in The Express Tribune, July 20^th, 2018.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.