Expiry of initial PPA likely in 2028: LDPL approaches Nepra for inclusion in IGCEP for another 10-15 years

ISLAMABAD: Liberty Daharki Power Limited (LDPL) has approached National Electric Power Regulatory Authority (Nepra) for its inclusion of another 10 to 15 years in the IGCEP after the expiry of its initial PPA expected in 2028.

Liberty Daharki Power Limited (Formerly TNB Liberty Power Limited) (LDPL) was incorporated on 21 August 1995 under the Companies Ordinance 1984, to design, construct, finance, own and operate a 235 MW (ISO) power plant located at Goth llahi Buksh, Taluka Mirpur Mathelo, District Ghotki, Sindh in pursuance of the Power Policy of 1994 and achieved its Commercial Operations on September 10, 2001.

According to a letter written to Chairman Nepra, the company has claimed that it has successfully completed over two decades of performance and is expected to complete its PPA obligations for the remaining term.

Since its COD, the Complex has delivered over 28,000 GWh to NTDC network thereby fulfilling its role in serving consumers. The Complex is a combined cycle gas fired project and currently has a net dependable capacity of 220.98Mw.

LDPL owns a Gas Treatment Plant (GTP) adjacent to Qadirpur Gas Fields being operated by OGDCL. The GTP receives raw gas from Qadirpur Gas Fields and then treats this raw gas to produce processed gas up to 50 MMCFD for onwards delivery to the LDPL Complex.

LDPL purchases raw gas from SNGPL based on the price determined by OGRA and owns a 29 KM gas pipeline for transportation of treated gas from GTP to the Complex for power production. The Power Plant is connected to 132 KV network of NTDC with interconnections to Guddu, Daharki, Mirpur Mathelo and Ghotki region.

The project has paid off its debt and hence its tariff has no debt servicing component. This means that the amount of Capacity Payment (CP) paid to LDPL is very low compared with new power projects, which would have carried foreign exchange denominated heavy debt servicing components to be paid by power consumers.

The original term of the PPA was set to expire in September 2026 (25 years). The Complex faced gas supply curtailments by SNGPL during winter months in the past five years or so. The matter has been settled between LDPL and CPPA(G) in the PPA Amendment Agreement which was signed in October 2021 whereby non-supply of gas by SNGPL shall be considered as Other Force Majeure Event (OFME) and the PPA Term shall stand extended by the amount of time during which such OFME persisted. Accordingly, the PPA shall continue until the end of 2028.

The power company has drawn the attention of Chairman NEPRA to clause 5.8 of the IGCEP (2021-30) which provides a list of power plants which are planned to be retired. Within this list, LDPL’s Complex is indicated to retire in 2027. While it is acknowledged that the term of the PPA may expire (as per the PPA Amendment Agreement) by end of 2028 the power plant has claimed that its Gas Thermal Plant (GTP) is receiving raw gas from Qadirpur gas fields which is being used for power generation after treatment.

LDPL’s project debt has been completely paid off which means: (i) debt servicing component is no more there in the tariff, (ii) foreign currency risk associated with the debt servicing is non-existent, and (iii) debt is 80% ofthe capital cost meaning a substantial reduction in Capacity Payment tariff compared with a new power plant.

The Project serves four interconnections and is surrounded by load centres being connected at 132kV, and is embedded in nature and provides the needed system stability and reliability.

The company in its letter further claimed that unlike some other large sized combined cycle projects, this project is medium sized (i.e. 220.98MW) and hence provides flexibility in making finer adjustments for system stability.

The Project has a Black Start Facility which will help the System Operator in recovering from a blackout. In view of the substantial amount of EOH remaining, the Complex is expectedto have another 10 to 15 years of economical operating life available beyond expected expiry of PPA in 2028.

Using gas and running on Combined Cycle mode, the project rests higher in the economic merit order, especially as opposed to the RFO fired power projects.

In addition to this, given the country’s current economic situation, there may be a scenario that some of the committed projects noted under clause 5.9 of the IGCEP may have been deferred or cancelled. Hence it is important to revisit the committed projects status so that the continuity of some of the merited power projects in the country can be ascertained.

in view of the benefits, LDPL requested the government to reconsider inclusion of its plant for another 10 to 15 years’ in the IGCEP after the expiry of its initial PPA which is expected in 2028.

Copyright Business Recorder, 2023