The tariff of 969 MW Neelum Jhelum Hydropower Project (NJHPP) is expected to be much higher compared to current tariff of HSD, furnace oil and gas-based power plants, well-informed sources in Wapda told Business Recorder.
With prevalent applicable interest rate of 15 percent on relent loans, the tariff of NJHPP has been calculated at Rs 14.18 per unit which is 16 percent higher against tariff of Rs 12.18 per unit for HSD-fired power plants, 126 percent higher against Rs 6.27 per unit for RFO-based generation and 135 percent higher against Rs 6.0162 per unit.
The top-brass of Water and Power Development Authority (Wapda) argues that the higher tariff of NJHPP in comparison to other fuels will be very difficult for the general public to accept.
According to sources, Wapda took up the issue of high relent interest rate on foreign loans with the centre and it was verbally promised by the Finance Minister Senator Ishaq Dar that he would reconsider a lower rate. Subsequently, the issue was taken up by the Ministry of Planning, Development and Reforms which recommended on June 30, 2015 that 'relending of foreign loans to Wapda and its corporate entities may be considered on the same terms as is being done in case of provincial governments,' but this has not yet been formally approved.
"Now, we are about to file a tariff petition for NJHPC with National Electric Power Regulatory Authority (Nepra). About 25 percent of the cost of the project is funded through foreign loans including buyer's credit from China Exim Bank. Resultantly, if the tariff petition is filed with the current relent interest rate of 15 percent, the tariff is likely to be around Rs 14.18 per unit. However, if the interest rate is on the same terms as given to the provincial government, the tariff would reduce to around Rs 11 per unit," the sources added.
Wapda's top brass argues that the high tariff is likely to attract a lot of criticism from general public and media.
"Once we file the tariff petition, it would be taken up by the press and be a subject of unnecessary adverse projection as the rate is likely to be higher than furnace oil based thermal generation and Regasified Liquefied Natural Gas (RLNG) as determined by the regulator recently (Rs 11.95 & Rs 8.84 respectively," the sources maintained.
The NJHPP is perhaps the first project in the world which was close to 80 per cent in terms of physical progress without a financial close.
The higher rate for hydel in comparison without any fuel input cost would be very difficult for the general public and media to accept and accordingly without any understanding the real causes, allegations of graft and mismanagement would be propagated in the execution of the project.
Under the existing arrangements, foreign loans secured for Wapda projects at 2-5pc interest rate were generally re-lent to Wapda at 15 pc while provinces get the same relending rate as the actual rate charged by foreign lenders.
Neelum Jhelum Hydropower Company Pvt Ltd financing detail of lenders is as follows: (i) Kuwait Fund $42 million and $12 million - markup/local charges 1.5 percent per annum- administrative expresses/commitment fee 1/2 of 1 per cent per annum- government relending terms (interest rate 8.2 per cent+ Exchange Rate Component (ERC) 6.8 per cent totalling it to 15 per cent ;(ii) Saudi Fund Development loan 11/506 $81 million(300 million S.R)-mark up 2 per cent per annum, administrative expenses/commitment fee 1/2 of 1 percent per annum- government relending terms 15 per cent;(iii) Saudi Fund for Development loan 13/599 $100 million (375 S.R) similar terms including relending rate of 15 per cent;(iv) OFID loan 1310P $31 million - markup rate 1.75 percent per annum, administrative expenses/commitment charges 1 per cent per annum - government relending terms 15 per cent;(v) OFID loan 1532 P $50 million, markup/local charges 1.75 per cent, administrative expenses 1 percent, relending rate 15 per cent;(vi) China Exim Bank $448 million- markup/local charges 6 month Libor plus 280 bps- administrative expenses/commitment fee Mgt fee( 0.75) per cent one time/ 0.5 per annum - government relending rate 15 percent; (vii) IDB-1 Pak 0121 for civil works $137.640 million - markup/local charges, $ swap rate plus 1.2 per cent, government relending rate 15 per cent and; vii) IDB-II Pak-134 for EMH equipment $220 million with 6 months Libor plus 120 bps and government relending rates 15 per cent. These loan agreements were signed from November 2010 to August 2011.
The GoP CDL for NJHPP is as follows: (i) interest rate 11.78 percent in 2006-07 with repayment period ( 5+20 years) of 5.270 billion on repayment period (2013-33);(ii) interest rate 10.65 percent in 2012-13 with repayment period of (5+20) of Rs 1.5 billion - repayment period (2018-38) and ;(iii) interest amounting to Rs 14 billion at rate 11.79 percent with repayment period ( 5+20) signed in 2013-14 and to be repaid 2019-39. Thus the total amount of interest has been calculated at Rs 20 billion to be paid from 2013 to 2039.
Another cost estimate of NJHPP is expected to be presented before the policymakers with Wapda arguing that the earlier approval included suppressed cost of over Rs 404 billion against the actual cost of Rs414 billion.
Wapda, sources said, maintains that it is sensitising the federal government on this particular issue, as the disbursement of Rs 404 billion will slow down the pace of construction and will adversely affect the project.