The Economic Co-ordination Committee (ECC) of the Cabinet has allowed Central Power Purchasing Agency (CPPA) to adjust Liquidated Damages (LDs) against Fauji Kabirwala Power Company Limited (FKPCL) for low availability from December 19, 2014.
According to official documents, Ministry of Water and Power informed the ECC in its recent meeting that Fauji Kabirwala Power Company Limited and the Pakistan Water and Power Development Authority (Wapda) had entered into a Power Purchase Agreement (PPA) on March 12, 1996 under the 1994 Power Policy, which was amended [Amendment No 1] on 25 November 1996.
The project commenced commercial operations on Oct 21, 1999, and ever since was supplying power to the National Grid. Amendment No 2 to the PPA was signed on May 30, 2001. The net dependable capacity of FKPCL Plant was 151.20 MW with a design on mix fuel. Fauji Kabirawala Power Company Ltd had Fuel Supply Agreement (GSA) with OGDCL for a term of 15 years which expired on October 20, 2014, however the term of the PPA was for 30 years [till October 20, 2029]. After the expiry of GSA in 2014, the fuel supplier had shown its inability to supply low BTU as well as the pipeline quality gas to the company at the committed ratios [70:30 respectively] due to shortage of indigenous gas with SNGPL and depletion of the low Btu Gas with the OGDCL. Resultantly, the required ratios of fuels could not be maintained by the Company as per the PPA.
The Ministry of Water and Power further informed the ECC that currently SNGPL is supplying LNG to the Fauji Kabirwala Power Company and the latter would enter into an FCA [not signed yet] with SNGPL and OGDCL for the supply of RLNG and low BTU gas to operate the plant to deliver net electrical output to the national grid.
The Ministry of Water and Power stated that now the fuel supplier was supplying gases to the company in varying ratios on a monthly basis with approximately low BTU and RLNG ratios [15: 85] respectively to FKPCL. It was stated that ECC, in its decision of January 23, 2015 had approved extension in the GSA until availability of RLNG to the company, and had directed Ministry of Petroleum to ensure full supply of gas by February 1, 2015 but unfortunately SNGPL had failed to give full gas quota due to which plant was running at a de-rated capacity. Resultantly, the company was disputing all LDs raised on account of low availability, low supply of gases by OGDCL and SNGPL. Nevertheless, the company is getting full capacity payment despite de-rationing.
In order to resolve the confronting issues, the Ministry of Water and Power proposed to amend the PPA [through amendment No 3] and submitted the following proposals for consideration and approval of ECC of the Cabinet: (i) to authorise CPPA to sign Amendment No 3, to the amended and restated Power Purchase Agreement with Fauji Kabirwala Power Company; and (ii) pursuant to ECC decision January 23, 2015 for resolution of LD''s.
The Ministry of Water and Power also pointed out that CPPA will adjust its LDs for low availability from December 19, 2014 till signing of the [amendment No 3] from company''s payables; thereafter low availability due to short/non supply of gas be considered as other force majeure event under the PPA.
The ECC discussed the proposal of Water and Power Ministry in detail and approved it in accordance with the summary.
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