RLNG-based power plant at Trimmu: CPPA-G facing distress for not being consulted

Central Power Purchasing Agency- Guaranteed (CPPA-G) is reportedly facing immense distress for not being consulted on 1263 MW RLNG-based combined cycle power plant at Trimmu(Jhang), arguing that it will put additional burden of Rs 143 billion on consumers till 2025, well-informed sources told Business Recorder.

This sentiment was also conveyed by Chief Executive Officer (CEO) CPPA-G, Abid Lodhi in a letter to Secretary Power, Irfan Ali, who is closely monitoring all the projects.

In February this year, Economic Coordination Committee (ECC) of the Cabinet had allowed Power Division for signing the Power Purchase Agreement (PPA) and Reimbursement Agreement (RA) with SNGPL for supply of gas to 1263.2 MW RLNG-based power generation project in Punjab. The proposal of Power Division regarding approval of SNGPL as gas supplier for 1263.2 MW RLNG-based public sector power generation project near Trimmu Barrage, District Jhang, by Punjab Thermal Power (Pvt) Limited and in modification of its earlier decision of May 11, 2018, allowed signing of the PPA and RA with SNGPL instead of Pakistan LNG Limited (PLL).

The meeting further directed that in case of provision of RLNG to the power plant at Trimmu, if other plants were to be made operational/run on furnace Oil (FO), the differential in the cost of FO and RLNG will be borne by the government of Punjab.

According to Mr. Lodhi, CPPA-G in a letter in response to Petroleum Division of October 22, 2019 regarding execution of the concession agreements of Punjab Thermal Power Private Limited (PLPL)'s RLNG-based power plant at Trimmu(Jhang) wherein the decision/ approval of Economic Coordination Committee (ECC) ratified by the Cabinet on October 14,2019 has been placed. Moreover, M/s SNGPL and PPL have been advised for execution of separate Gas Sale Purchase Agreement (GSPA) for supply of 185 MMCFD on take-or-pay basis for fulfilling the RLNG requirements of M/s Punjab Thermal Power Private Limited (PTPL).

CPPA-G's comments on the summary presented to the ECC of the Cabinet and its decision were never sought despite the fact that CPPA-G by virtue of its role as the power purchaser and agent of Distribution Companies (Discos) is a major stakeholder in this matter.

The CEO maintained that had CPPA-G been provided an opportunity to offer comments on the issue, the following comments would have been brought to the notice of the ECC of the Cabinet: "the transition of generation mix towards cheaper and indigenous resources is resulting in displacing RLNG plants with local coal, nuclear and partially by imported coal, as such, the proposed existing arrangement of minimum guaranteed off-take of 66 per cent under the PPA is not sustainable. If such guaranteed off-take continues to be maintained in the PPA for Punjab Thermal Power Plant as well, economic merit order would have frequent violations resulting into the dispatch of the costly power plants and non-utilization of the efficient generation plants. The minimum take or pay provision, in the PPA may entail a cumulative loss of Rs 143 billion till 2025 only for this project, which will eventually have to be either picked up as subsidy by GoP or borne by the end consumers of electricity".

CPPA-G has strongly requested the Power Division that ECC of the Cabinet should be apprised about this situation with a view to ensuring that no additional take or pay obligation linked with minimum 66 per cent guaranteed off-take should be imposed on power sector i.e. CPPA-G. In the wake of current and future demand scenarios, there is every likelihood that Quaid-e-Azam Thermal Power (Private) Limited (QATPL) and National Power Parks Management Company (Private) Limited (NPPMCL) projects would also not be in a position to be operated on economic dispatch at 66 per cent minimum guaranteed levels by NPCC resulting in imposition of net proceeds differential to the power sector.

Copyright Business Recorder, 2019