Globeleq, a US-based company, has decided to withdraw its interests from the 200 MW Balloki power project due to what the company says adverse effects of Nepra''s decision on power generation tariff, official sources told Business Recorder.
The company''s Chief Executive, Robert C Hart, has written a letter to the Minister for Water and Power, Liaquat Ali Jatoi, a copy of which was faxed to Prime Minister Shaukat Aziz, saying that Globeleq would continue to invest in power sector despite an unacceptable decision regarding Balloki project.
"Tariff determined by Nepra has a sufficiently negative effect on the fundamental economics of the project that it will not enable cost recovery or provide a market equity return," he said.
Of particular significance was the ruling in the final decision with respect to a reduction in the allowable level of operations and maintenance costs to be passed through by inclusion in the tariff and the non-allowance of indexation of the tariff to increases, if any, in the dollar-denominated consumer price index.
"We must also acknowledge that the project costs (as presented in the feasibility study) were underestimated, which has also contributed to the tariff being inadequate," he added.
The company''s Chief Executive said that like all other global investors, the company was constantly challenged to rank available investment opportunities based on risk and return.
"All of our possible investment opportunities undergo rigorous analysis, and sometimes we inevitably have to make some difficult decisions to withdraw from projects based on likely returns," he said.
As a result of Nepra''s final decision, he observed, the Balloki project does not meet the company''s threshold criteria and if the Orient Power ultimately succeeded in its ongoing efforts to obtain changes in the project parameters like increase in project returns to acceptable level, the company certainly would give consideration to re-entering the project.
Globeleq, however, assured that it would remain committed to pursuing and participating in projects in the power sector in Pakistan, hoping that the company would soon be able to identify a project that would meet its threshold requirements.
The company said it anticipated that Pakistan would remain a focus market in terms of investment in power sector and was actively evaluating several other options including the 400-500 MW Uch II, 450MW Faisalabad, and 400 MW Lahore projects.
"We are also in a long-term, co-operative relationship with the Fauji Foundation to jointly examine new green field projects and other opportunities in Pakistan and are in the process of acquiring EI Paso Corporation''s indirect interests in the Kabirwala and Saba projects," he concluded.
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