Power initiative: K-Electric to switch to coal, says NEPRA

Company to convert unit number three, four at Bin Qasim.

KARACHI: The National Electric Power Regulatory Authority (Nepra) has allowed K-Electric to switch a few of its fuel-run power plants to coal, marking a major step in Pakistan’s fight against the energy crisis.

K-Electric announced that Nepra approved its Licencee Proposed Modification (LPM), a pre-requisite sent by the company for its coal conversion project.

This is the first initiative of its kind in the country where a power producer is moving towards an alternative fuel.

K-Electric will convert its unit number three and four at Bin Qasim Power Station-1 to coal. Each unit has a capacity of 210 megawatts.

The project is also unique in its structure. Instead of making a direct investment, K-Electric has leased the two units to a special purpose company K-Energy, which has been formed by project sponsors.

These sponsors, who have been wooed by the management, will invest $350 million to build new coal-specific boilers and auxiliary facilities including coal handling equipment.

An engineering and procurement contract for the project had already been executed with Harbin Electric International of China in November 2013.

The company is still waiting for Nepra to approve the tariff. Soon after coming to power last year, the Pakistan Muslim League-Nawaz (PML-N) government resolved the contagious circular debt crisis by releasing Rs500 billion to energy firms and, in return, asked a few independent power producers (IPP) to switch from oil to coal.

Nepra had to prepare a policy including a tariff for the IPPs that switched to coal. The authority’s existing framework for power plants, which use coal, covers completely new projects. Hub Power Company has also approached Nepra for the tariff.

K-Electric, formerly known as Karachi Electric Supply Company, decided to use coal even before the government came out with its proposal in mid 2013.

Unlike other IPPs, the power utility’s existing plants do not operate under a fixed internal rate of return regime. Instead, K-Electric has an efficiency-based formula to determine the return.

Marine Group of Companies, which is building a dirty terminal at Port Qasim with an annual capacity to handle 15 million tons of coal, cement and clinker, had signed an agreement with K-Electric to handle coal logistics.

Published in The Express Tribune, April 4^th, 2014.

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