Home »Top Stories » Two RLNG-fired power plants: PD to seek Cabinet”s approval to make offer to KSA

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  • Oct 3rd, 2018
  • Comments Off on Two RLNG-fired power plants: PD to seek Cabinet”s approval to make offer to KSA
Power Division is to seek federal cabinet''s approval to offer two RLNG- fired power plants of 1250 MW each to Saudi Arabia through privatisation process, well-informed sources told Business Recorder. The cost of both projects, sources said, is around $1.6 billion with 30 per cent rate of return.

Analysts maintain that the government should not sell both projects for less than $ 2 billion keeping in view the projected rate of return for the two projects over 25 years. The government may also offer two other RLNG projects of Punjab government i.e. Bhiki and under construction project at Trimmu barrage (near Jhang). The cost of Trimmu project is $ 680 million.

"The Punjab government projects may be sold for $ 1 billion net each - the amount left with the government after the loan component of these projects is adjusted. The sale of two federal and two Punjab government projects can net Pakistan about $ 4 billion," said one analyst.

Unconfirmed reports suggest that Saudi Arabia has expressed its willingness to purchase RLNG projects at original cost. When contacted Minister Power Division, Omar Ayub said that the government is evaluating the interest of Saudi delegation in RLNG projects. "We have to consider the methodology and legal mechanism of the sale," he added.

In reply to a question, the Minister said that the Board of Investment (BoI) is engaging with the Saudis and as and when the Saudi make up their minds and come back to the government with an offer then a final mechanism may be agreed.

Last year, the PML-N administration approved that the ECC, before privatisation takes place, shall review and adjust the risk allocation under PPA, which is meant exclusively for RLNG-based public sector power projects particularly pertaining to Non-Supply Event (as defined in the PPA), in the light of the prevailing power policy for private sector power projects at the time of such privatisation.

An official in Privatisation Commission said that the government''s plan to privatise three LNG-fired power plants on a fast-track basis may face some constitutional challenges.

If the government intends to privatise power plants it would require approval of the Council of Common Interests (CCI), the official added.

In 2016 the Pakistan Muslim League (N) government stopped the process of privatising power sector entities due to sustained opposition by employees and proposed privatization of LNG based under construction power plants also raised eyebrows.

Sources revealed that the PML-N administration had intended to privatize power plants but, as per the Constitution, electricity is a joint subject of provinces and the centre and requires CCI approval.

The government has yet to move a case to the provinces for placing the sale of power plants on the CCI agenda, said sources. It requires almost one year after the approval of the CCI to initiate and conclude a privatisation transaction, said a former member of the Privatization Board.

The three power plants with a cumulative capacity of about 3,600MW are being developed in the public sector at Bhikki, Balloki and Haveli Bahadur Shah in Punjab.

The Quaid-e-Azam Thermal Power Private Limited, a Punjab government company, constructed the Bhikki plant. The remaining two projects at Balloki and Haveli Bahadur Shah are owned by National Power Park Management Company Limited (NPPMC), which is wholly owned and controlled by the federal government and is being financed through the Public Sector Development Programme (PSDP).

Copyright Business Recorder, 2018

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