Rs9b released for equity injection into power plant

With financing, work on stalled Jamshoro project will kick-start

ISLAMABAD:

The federal government has released Rs9 billion for equity injection in an attempt to kick-start work on the stalled 660-megawatt Jamshoro coal-based power plant.

A local bank had earlier refused to extend financing of Rs10 billion owing to the federal government’s reluctance to provide funds for equity injection.

Pakistan has been paying commitment charges to a foreign lender for years as work on the project ground to a halt in the absence of necessary financing.

The Asian Development Bank (ADB) had committed funds for the Jamshoro coal-fired power plant but equity could not be arranged.

At a public hearing on Tuesday, officials of the Planning Commission revealed that they had released Rs9 billion as equity financing for the Jamshoro power plant.

Government officials acknowledged at the hearing that the government had been paying commitment charges to the ADB, though the loan had not been utilised because of delay in determining the generation tariff and arranging equity funds.

During the hearing, Jamshoro Power Company Limited (JPCL) sought a high tariff of Rs32 per unit for the coal-based plant.

However, the National Electric Power Regulatory Authority (Nepra) argued that they were also working to protect the interest of consumers, therefore they could not grant such a high tariff.

It was pointed out that the mark-up on commercial financing would also be passed on to consumers through the tariff.

Nepra called for taking some measures to “correct the tariff for coal-based power plants”. “Who will pay such a high tariff,” a Nepra official asked.

The hearing was informed that the main objective of the project was to increase the power generation capacity with highly efficient and environmentally friendly technology, resulting in improving the fuel mix and a reduction in the cost of power supply, thereby reducing the bulk tariff and circular debt.

Project officials sought adequate facilities for the generation, transmission and distribution of electric power to meet future requirements of the domestic, commercial, industrial and agricultural sectors, and support the overall economic development.

For the project, a site is already owned by the project company but 100 acres of land for an ash pond have yet to be taken over by the company.

The engineering, procurement and construction (EPC) contract for Lot-I of the project was signed on March 29, 2018 with a 60-month completion period.

The contractual commercial operation date (COD) was December 27, 2021 and the tentative COD is now November 30, 2023.

As per the contractual arrangement between the project company and the EPC contractor, the latter was to take over the plant within 42 months of the fulfillment date, as defined under the EPC contract.

However, the completion deadline could not be met. Construction work on the project is currently going on and the COD is expected to be achieved on November 30, 2023.

The delay was caused by different causes that were inherently outside of the control of the project company.

To give site possession to the EPC contractor, the gas station of existing units of the project company were required to be relocated outside the project area and the same was conveyed to Sui Southern Gas Company (SSGC).

As per the communication, the gas station was to be relocated in June 2018, however, the actual relocation was made in March 2020, which resulted in a delay in the construction period.

Published in The Express Tribune, May 17^th, 2023.

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