PPIB gives some IPPs power tariff even higher than rental projects

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (May 18 2009): The Private Power and Infrastructure Board (PPIB) has been quizzed by its members for allowing higher tariff to independent power producers (IPPs) currently being set up under fast track strategy as compared to rental power projects which, they allege is contrary to international best practice, sources told Business Recorder.

They said that PPIB's Board was informed on April 9, 2009 that the first five ranked rental power projects-Sialkot Rental Power (65 MW), Premier Energy Pvt Limited (7.81 MW), Reshma Power Generation Limited 201.3 MW), Ruba Engery Pakistan (Pvt) Limited (155.55 MW), and Consortium of Tapal Family (70 MW)-had been accepted as qualified bidders, aimed at achieving the target of 1500 MW set by the Economic Coordination Committee (ECC) of the Cabinet. These projects are planned to be commissioned by the end of December 2009.

However, when the tariff was discussed at the Board meeting, some of the members were keen to know why the PPIB had offered higher tariff to IPPs as compared to rental power projects.

"The Board inquired why the tariffs of rental projects are lower than IPPs while logically the tariff of rentals should be higher," sources said.

According to sources, PPIB Managing Director Fayyaz Elahi and Director Finance and Policy Shah Jahan Mirza attempted to explain that the tariff of IPPs and rental projects were based on different parameters, and elaborated on the major underlying differences, but failed to satisfy the Board members.

"Board members advised the PPIB to compare tariffs of IPPs and rental projects on common parameters and circulate them for the consideration and approval of the fast track IPPs bids (Package-II) by the Board members", sources added.

According to sources, PPIB Managing Director also tried to explain to the Board that although the working paper was not included on the five rental projects, he would seek guidance on the results of the latest ICB carried out for rental and IPPs projects for which bids were received on January 26, 2009 and February 16, 2009, respectively.

He further explained that after evaluation of the envelope-II (financial and tariff bids), the evaluation committee recommended that there was room for reduction in the tariff quoted by the bidders and tariff reduction may be negotiated with all bidders.

Accordingly, the competent authority constituted a negotiation committee under the chairmanship of Pepco Managing Director (Convenor), Director (Finance and Policy) PPIB, and Senior Manager (Legal) PPIB as its members.

The members of the negotiation committee held detailed meetings with representatives of the qualified bidders and explained to them the rationale for seeking reduction in tariffs and commissioning times (for rental projects only).

According to PPIB Managing Director, to maintain transparency and sanctity of the process, it was decided not to discuss/negotiate tariffs during the meeting, and the bidders were asked to submit the reduced tariff and Commercial Operation Dates (CODs) which were opened in their presence.

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