The government has anticipated that 600 MMCFD of R-LNG would be available for the power generation projects in 2017-18. The Cabinet Committee on Energy (CCoE) headed by the Prime Minister has already approved 3,600 MW RLNG based power plants to be located at Bhikki, Balloki and Haveli Bahadur Shah.
Prime Minister has already performed the ground breaking ceremonies of two projects - 1230 MW approx each, at Bhikki and Haveli Bahadur Shah.
For this purpose, the GoP has incorporated a special purpose management company namely M/s National Power Park Management Company Limited (NPPMCL), a private limited company, exclusively owned and controlled by the federal government to undertake RLNG-fired projects to be established through financing arrangements under PSDP. The PC-1 of the projects has been approved by Ecnec and accordingly Rs 2.5 billion has already been released to NPPMCL for the projects.
According to the Ministry of Petroleum and Natural Resources necessary draft set of agreements amongst Pakistan State Oil (PSO), ENGRO terminal, SNGPL and SSGC, pertaining to the import, re-gasification and distribution of LNG have been finalised after detailed deliberations to transmit the R-LNG up to the project sites. NEPRA has also notified an upfront tariff for LNG based projects. Quaid-e-Azam Thermal Power plant at Bhikki has already filed a tariff petition with Nepra for the determination of its tariff, which has yet to be notified by Nepra.
The sources said, Power Purchase Agreement(s) (PPAs) is now required to be executed between the buyer, which is CPPA, and the public sector power producers in accordance with the guidelines set out in Power Policy 2015. A draft PPA has been prepared by the Quaid-e-Azam Thermal Power Company, a company fully owned by Govt. of Punjab for its power plant at Bhikki upon provisional discussions with Ministry of Water and Power and CPPA.
Prime Minister Nawaz Sharif has already directed the Ministry of Water and Power to submit a proposal to the Law Ministry seeking an amendment in the PPIB law since PPIB is finding it difficult to legally treat the LNG based power plants as IPPs.
PPIB under the PPIB Act is mandated to process only private sector and public-private power projects whereas RLNG fired projects are being set up in public sector. Based on the legal understanding, the case was submitted to the Ministry of Water and Power for solicitation of detailed legal opinion of Law Ministry on the following issues: (i) whether PPIB can issue Letter of Intent (LoI) and Letter of Support (LoS) and enter Implementation Agreement (IA) and GoP guarantee pursuant to the PPIB Act, policy and the PoA for the public sector projects (including provincial public sector projects); and (ii) whether concessions would be applicable to private sector projects for the term of the projects under the IA in relation to taxation and import controls, foreign currency exchange and transfer of funds, restriction on acquisition and transfer of shares and assets. International arbitration, risk coverage for force majeure and events of defaults, compensation upon termination of GoP sovereign guarantee are applicable to the public sector projects (including provincial public sector projects).
PPIB further argued that as such, the onus of developing and executing the PPA shall have to be shifted to CPPA.
The sources said, Ministry of Water and Power will seek authorisation from the Economic Co-ordination Committee (ECC) to authorise CPPA to develop and execute the PPA for the three RLNG based power projects in the public sector only. ECC's approval has also been sought to allow CPPA to adopt the draft PPA by incorporating the following concepts: (i) the event of non supply of RLNG at the complex should not be made the Pakistan Political Force Majeure Event (PPFME). Instead, the PPA should have a provision to operate the complex on diesel as alternate fuel as per dispatch instructions from NPCC; (ii) all risks associated with the supply of RLNG at the complex may be initially parked with CPPA, later on to be reimbursed by the defaulting party to CPPA through a reimbursement agreement to be signed between SNGPL and CPPA. It also entails a condition of 15 years back to back arrangement of fuel by SNGPL with Qatar Gas, which will require CPPA/NTDC to categorise these plants as "must run" owing to the peculiarity of the mechanism of importing of LNG; (iii) concepts of "partial commissioning and Net Proceeds Differential" may be incorporated in the PPA if allowed in the revised Tariff Determination to be issued by NEPRA; and (iv) in case of privatisation of these power plants in future, Privatisation Commission shall review the PPA in the light of prevailing power policy for IPPs in the private sector, before discharging this responsibility
CPPA further argued that if RLNG shall be diverted to any other consumer by the SNGPL and the loss of revenue to SNGPL resulting from the difference in the "rates of imported RLNG used by power producer" and the "rate charged to alternate consumer as local gas" shall be borne by CPPA. NEPRA has not yet approved the concept of the Net Proceeds Differential is its determination.
It is also proposed that the "event of non supply of RLNG at the complex" has been proposed to be made the Pakistan Political Force Majeure Event (PPFME). The event of non-supply of RLNG at the Complex, if treated as PPFME, translates into a situation where the power purchaser (CPPA) shall be obligated to pay the capacity payments during the period of non-supply of RLNG at the Complex up to a maximum of 180-days, even including the periods of forced outages (which are attributable to the power producer's inefficiency). The monthly Capacity Payment for the three RLNG based projects is expected to be approx. Rs 6 billion.
The Commercial Operations Date (COD) The COD has been proposed in the draft PPA to be on Partial Commissioning bases. The billing cycle is proposed to be on fortnightly basis.