The Economic Coordination Committee (ECC) of the Cabinet has directed the Privatization Commission to fast-track the privatization process of National Power Parks Management Company (NPPMCL), but deferred the decision with regard to adjustment of risk allocation under the Power Purchase Agreement till its next meeting.
The ECC meeting chaired by Advisor on Finance Dr Abdul Hafeez Shaikh was also informed that change in the percentage of gas supply to these plants managed by the NPPMCL would not impact the privatization of the company because of guaranteed capacity payment of both the power plants - Haveli Bahadur Shah and Baloki Power Projects - under the PPA.
The meeting was told that reallocation of gas to other sectors of the economy could be considered in the next meeting wherein a detailed proposal in this regard would be presented by the Privatization Commission.
According to officials, the Power Division has put up various proposals with regard to dealing with the issue of minimum guaranteed off-take of 66 percent to these power plants and wanted an end to the existing minimum guaranteed annual LNG off-take to facilitate privatization plants in Punjab. However, PSO, SNGPL and SSGCL reportedly argued that such a decision would make them financially unviable because their entire LNG supply chain from Qatar to end-consumers is based on guaranteed off-take.
They added that the sole argument of LNG import for power sector was to reduce import bill through substitution of expensive furnace oil as well as to increase power sector efficiency and more than 80 percent of total LNG imports is being consumed by power sector.
The different options suggested by the Power Division included; (i) withdrawal of the existing minimum guaranteed off-take on annual basis; (ii) withdrawal of the existing minimum guaranteed off-take of 66 percent immediately after the review period of PSO agreement with Qatar Gas in 2025; or the difference of the RLNG requirements for these two power plants and the RLNG requirements for minimum 66 percent guaranteed off-take should be utilized by other sectors of the economy and; (iii) additional cumulative impact on the basket arising due to the guaranteed off-take of 66 percent up to 2025 on account of dispatch of these power plants beyond the principle of economic merit order be allowed as a subsidy to power sector consumers.
The first option required a revised Power Purchase Agreement (PPA), Gas Supply Agreement (GSA) and Implementation Agreement (IA) for the purpose of privatization of National Power Parks Management Company Limited (NPPMCL).
The second option involves further two choices if the government is contractually bound to PSO's agreement with Qatargas till the year 2025; (a) to withdraw the existing minimum guaranteed off-take of 66 percent immediately after the review period of PSO agreement with Qatar Gas in 2025; (b) till 2025, the difference of the RLNG requirements for these two power plans as per economic merit order principle and the RLNG requirements for minimum guaranteed off-take should be utilized by other sectors of the economy.
Third option proposed by the Power Division requires subsidy to the power sector to offset additional cumulative impact of over Rs 400 billion on the basket arising of guaranteed off-take of 66 percent up to 2025 on account of dispatch of these power plants.
Copyright Business Recorder, 2019
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