Nepra had to prepare a policy including a tariff for the IPPs that switched to coal. PHOTO: AFP
KARACHI: The National Electric Power Regulatory Authority (NEPRA) has approved a generation licence for K-Energy, allowing it to convert generators at Bin Qasim Power Station to run on coal instead of oil.
K-Energy, a subsidiary of K-Electric, has been been set up to undertake the coal conversion project of 420MW at the power plant, the utility said on Monday.
The issue had been pending for over a year and the approval comes as a big boost for K-Electric as it inches towards diversifying fuels it uses to run power plants.
K-Energy and Harbin Electric of China signed an EPC contract back in 2013 where Harbin would construct new coal-fired boilers on these two units of BQPS unit-1.
Harbin Electric International is one of China’s largest enterprises in power project contracting and export of power equipment.
The project is expected to be completed in two and a half years at an approximate cost of $400 million.
“These coal-based units are equipped with emission-controlled technologies in compliance with all applicable local and international environmental regulations,” the company said.
K-Electric has been rehabilitating old plants and units the new management acquired in 2009. With these coal-fired boilers, K-Electric would become the first to generate electricity using coal.
“Issuance of generation licence is a major breakthrough and now Nepra would determine the tariff for the project which will ultimately provide relief to the end consumers.”
The project is unique in its structure. Instead of making a direct investment, K-Electric has leased two units to the special purpose company K-Energy, formed by project sponsors.
The sponsors will invest new coal-specific boilers and auxiliary facilities including coal handling equipment.
Soon after coming to power last year, the 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 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.
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.
Published in The Express Tribune, March 17th, 2015.
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