Privatisation of LNG plants, DISCOs put on fast track

Power Division asked to step up efforts to remove bottlenecks

ISLAMABAD:

The caretaker government has stepped up efforts to privatise two liquefied natural gas (LNG)-based power plants as well as power distribution companies (DISCOs), though it faces scores of bottlenecks in policy decisions.

The Power Division has prepared a summary, which will seek approval of the Council of Common Interests (CCI) for the acquisition of DISCOs by provinces.

The caretaker government is considering two options – either to privatise DISCOs or hand over them to provinces. But there are several obstacles that have stymied progress.

The interim administration has been informed that prior actions need to be taken for the privatisation of DISCOs, which include balance sheet cleaning, outlining tariff rules, transfer of government equity to provinces, the future receivables’ mechanism in the context of erstwhile Fata and AJK, privatisation of supply-side or distribution-side business or both, licensing regulations and criteria, etc.

Negotiations with labour unions are also an essential prerequisite. The Privatisation Commission (PC) has recommended the way forward.

The caretaker government may direct the Power Division and the National Electric Power Regulatory Authority (Nepra) to address the challenges to pave the way for PC to press ahead with the privatisation process.

In a recent meeting, the Cabinet Committee on Privatisation (CCOP) was informed that World Bank experts in March 2021 had recommended concession contracts and management contracts for private sector participation in DISCOs.

CCOP and the PC board approved both in May 2021 as the most viable options. Later, in June 2022, the CCOP asked the Power Division to consult with all provinces on taking over management control of DISCOs.

In early 2023, the Prime Minister’s Office constituted a 12-member committee, headed by the minister of defence, to look into the matter of handing over DISCOs’ control to the provincial governments.

Later, the PC shared transaction-specific comments for consideration of the Power Division in response to a draft policy for the acquisition of DISCOs by the provinces.

However, there were bottlenecks like heavy payments to the Pakistan Development Fund Limited (PDFL), Sui Northern Gas Pipelines Limited (SNGPL) and receivables from the Central Power Purchasing Agency-Guarantee (CPPA-G). Privatisation of DISCOs may be possible only after the resolution of those issues, the CCOP was told.

LNG-based plants

It was pointed out that the government may hand over two LNG-fired power plants, running under the National Power Parks Management Company Limited (NPPMCL), to the United Arab Emirates (UAE).

NPPMCL, incorporated in 2015, owns and operates 1,230-megawatt LNG-based Haveli Bahadur Shah and 1,223MW Balloki plants.

In September 2019, the CCOP approved 100% divestment of NPPMCL or the two power plants independently by adopting a hybrid structure, which was later ratified by the cabinet in October 2019.

Out of 23 interested parties, 12 submitted the requisite documents and were pre-qualified by the PC board. However, bidding process could not begin due to the Covid-19 pandemic.

The CCOP chairperson gave the directive to hold a meeting of the committee focused on power sector transactions in an attempt to develop a clear plan of action. It was emphasised that the Power Division should initiate efforts to remove the bottlenecks in liaison with PC, Petroleum and Finance Divisions.

Published in The Express Tribune, October 13^th, 2023.

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