PPIB admits rental plants' tariff higher

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (July 23 2009): The Private Power Infrastructure Board (PPIB) has acknowledged that tariff of rental power plants is higher than independent power producers (IPPs) despite lower efficiency, official sources told Business Recorder. Earlier, some senior officials of Pakistan Electric Power Company (Pepco) had said in Islamabad at a meeting with the donors that the recent power crisis had compelled Pepco to install most inefficient and expensive power plants.

"Tariff for rental projects is higher than the IPPs by 0.76 cents to 1.63 cents per unit. Being used, rental projects also have low efficiency as compared to IPPs, resulting in higher fuel cost," sources quoted senior officials of PPIB as having briefed the Board.

PPIB Managing Director Fayyaz Elahi briefed the Board that it had invited bids through international competitive bidding (ICB) on September 26, 2008 under two packages; (a) package-I (IPP and rental power projects to be commissioned by the end of 2009); (b) package-II (IPP projects to be commissioned by the end of 2010).

Under package-I, no bid was received for IPPs, while under package-II, three bids from the following bidders were received: (a) Engro PowerGen (Pvt) Limited-527 MW net, (b) Reshma Power Generation Limited-137.11 MW net, and © Saba -154.07 MW net. After evaluation of envelope-I (qualification and technical bids), envelope-II (financial and tariff bids) were opened on March 11, 2009. The bid evaluation committee, while presenting the evaluation report, recommended that there was room for reduction in tariffs quoted by bidders. Hence, the tariff reduction should be negotiated with all bidders.

Sources said tat the Minister for Water and Power, Pervez Ashraf, constituted a committee, which negotiated tariff with the bidders and asked them to submit revised tariff in sealed envelopes. The revised tariffs were opened on April 7, 2009 in the presence of negotiation committee, PPIB official and the bidders.

According to sources, presentation was also made to the Board on the results of evaluation for consideration and approval along with the comparison of tariffs for IPPs and rental projects on common parameters (ie fuel price, plant factor and exchange rate).

Sources said that the government has been holding meetings with the Presidents and Chief Executive Officers (CEOs) of banks and DFIs at National Bank of Pakistan (NBPs) to finalise loan facility arrangements for 14 percent advance payment to rental power projects, but the issue is still unresolved. Most of the banks are reluctant to issue Standby Letters of Credit (SBLCs) for whole tenure of the contracts due to their excess exposure on power sector and their own constraints.

Rental power projects are being added on the basis of 36-60 months tenure with 7 to 14 percent advance payments, and SBLC or GoP guarantee, as security. Sources said that the issue had been brought to the notice of President Asif Ali Zardari and Prime Minister Yousaf Raza Gilani so that the banks could be pressed through State Bank of Pakistan (SBP) so that rental plants could get advances.

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