The federal government has allowed provinces to submit power project summaries to the cabinet through Council of Common Interests (CCI) on the analogy of Trimmu Barrage thermal power project in accordance with the parameters of National Energy Policy, official sources told Business Recorder.
The Power Division, in a summary, informed the ECC on May 11, 2018 that Cabinet Committee on Energy (CCoE) on June 6, 2017 approved a new 1,200 MW LNG-based power project in Punjab and directed the then Ministry of Water & Power to initiate required actions immediately. Furthermore, CCoE also relaxed, to the extent of this project, the ban it had placed on new imported fuel-based power projects.
The sources said, pursuant to the direction of the CCoE, and upon the request of Energy Department, Government of Punjab the then Ministry of Water & Power, in its letter of June 20, 2017, directed Private Power & Infrastructure Board (PPIB) to process the project as Independent Power Producers (IPPs) in accordance with the Power Generation Policy 2015.
Government of Punjab also notified that Punjab Thermal Power (Pvt) Ltd, a wholly owned company of the GoPb will set up the project. Accordingly, PPIB issued Letter of Intent (LoI) on July 26, 2017 to the project company for setting up of 1263.2 MW (gross at reference site conditions) Independent Power Generation Project based on R-LNG to be established near Trimmu Barrage, District Jhang with the approval of the Chairman PPIB which was subsequently rectified by the PPIB Board.
The then Ministry of Petroleum & Natural Resources (currently Petroleum & Natural Resources Division) in its letter written on June 21, 2017 allocated approximately 200 MMCFD RLNG for the project. The project will be financed through equity to be contributed by GoPb and debt by commercial banks with debt to equity ratio at 75:25.
Thus the project is a public sector power project as envisaged under Private Power & Infrastructure Board Act 2012. NEPRA has determined tariff for the project. Letter of Support (LoS) was issued to the project company by PPIB on January 26, 2018 pursuant to which the project company was required to execute Implementation Agreement (IA) and Power Purchase Agreement (PPA)and achieve financial closing within given time lines.
It was pointed out that upon the direction of Power Division, PPIB has processed three R-LNG based public sector projects of cumulative capacity of approx 3,600 MW amongst which one 1180 MW by Quaid-e-Azam Thermal Power Private Limited (QATPL), a wholly owned company of GoPb (Bhikki Project) and the other two, 1230 MW (HBS Project) and 1223 MW (Balloki Project), owned by National Power Park Management Company Limited (NPPMCL). These projects are developed as public sector projects. For the purpose of three public sector power projects, ECC on April 4, 2016 approved the Standard Power Purchase Agreement and on July 28, 2016 approved Standard Implementation Agreement (IA).
The Power Division further stated that as CCoE in its meeting also enjoined that the project was planned to be financed through banks, it was imperative to offer the same concession package (PPA and IA etc) which was approved to other public sector power projects. CPPAGL in consultation with the project company has developed and drafted a project specific PPA which was stated to be primarily based on PPAs executed for public sector power projects.
Furthermore due to peculiar nature of the transaction, CPPA-G has also finalized Reimbursement Agreement (RA) to be executed by and between CPPA-G and Pakistan LNG Limited. So far as the Implementation Agreement is concerned, earlier ECC approved Standardized Implementation Agreement (IA) for the public sector projects would be executed with project specific changes only. It was mentioned that the PPA developed and finalized by CPPAGL, amongst others, provides peculiar risk allocation such as (a) all risks associated with the supply of RLNG at the complex to be initially parked with CPPAGL, later on to be reimbursed by the defaulting party to CPPAGL through a RA to be signed between SNGPL and CPPAGL; (b) in the event of non Supply of RLNG at the complex whether due to failure or force majeure of gas supplier or any entity in the supply chain upto Qatar gas, the project company will make the complex available for dispatches on alternative fuel (HSD); after the exhaustion of the request fuel stock of seven days at full load, the project company would be entitled to declare political force majeure event entitling it to claim payment from power purchaser, however, subject to the condition that the project company will be bound to place firm orders for replenishment of the daily consumption of alternate fuel (HSD) in minimum possible time; (c) such PPA also entails a condition of 15 years back to back arrangement of fuel by Pakistan LNG Limited with Qatar gas, which will require CPPAGL to categorize these plants as "must run" owing to the peculiarity of the mechanism of importing of RLNG. As the risk allocation with regard to non-supply of RLNG as well as minimum take or pay commitment under the PPA to be reflected and backstopped under the IA are unusual in juxtaposition to project finance structures and adds significantly additional financial obligations under the IA and GoP guarantee compared to those under the standard IA and GoP guarantee being issued to the private sector power projects, a clear policy mandate for such risk allocation for said public sector project was required from ECC.
The Board of PPIB in its 113th meeting held on January 11, 2018 also approved the summary along with Standard Implementation Agreement and PPA& RA as finalized by CPPA-G. The Power Division submitted following proposals for consideration and approval of the ECC: (i) Standard IA already approved by ECC exclusively for the public sector power project to be executed by PPIB for the project; (ii) CPPA(G)may further be authorized to make and approve any amendments in the project specific PPA required to comply with NEPRA's tariff determination; and (iii) in case of privatization of the project in future, the ECC before such privatization takes place, will review and adjust the risk allocation under this agreement and PPA, which is meant exclusively for RLNG based public sector power projects particularly pertaining to non-supply event in light of the prevailing power policy for private sector power projects at the time of such privatization.
The ECC approved the Power Division's summary and Implementation Agreement, Power Purchase Agreement & Reimbursement Agreement for 1263.2 MW RLNG based public sector power generation project near Trimmu Barrage, District Jhang, Punjab by Punjab Thermal Power (Pvt) Limited.
The ECC also decided that, in future, any Provincial Government, on the analogy of this summary can put up its proposal for consideration of the Federal Government/ Cabinet through CCI keeping in view the supply & demand situation and parameters set by National Electricity Plan/Policy.
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