The federal government is likely to amend wind power policy aimed at accommodating those investors who received Letters of Intent (LoIs) on the basis of upfront tariff and now have become irrelevant after the announcement of new tariff mechanism for wind project by National Electric Power Regulatory Authority (Nepra), well informed sources told Business Recorder.
"As the government was informed that Nepra has replaced upfront tariff policy for wind project with benchmark levelized tariff, the concerned organisation which deals with alternate energy projects has started work on documentation and policy modification. We are trying to sort out this issue as early as possible," the sources added. Sindh government, sources said, has issued "wholesale" LoIs to the investors instead of keeping in view grid power evacuation capacity of NTDC. AEDB has to pick and choose on the basis of lowest bidding, the sources continued.
Recently, Nepra announced benchmark levelized tariff of 6.7467 cents per unit KWh for wind power projects on 100% foreign financing discounted at 10% per annum and 7.7342 cents per unit on 100% local financing. According to Nepra, the new tariff has been decided on a suo motu notice by the regulator which used three-month LIBOR of 0.6% and three months KIBOR of 6% respectively whereas reference TT & OD selling rate used was $105. Around 20 companies were waiting for new tariff.
This tariff will be applicable for wind power generation only. The relevant agencies will conduct the bidding under Nepra Competitive Bidding (Approval Procedure) Regulations, 2014. The validity period for the tariff is 365 days from the date of issuance of this determination. The power purchaser will not take the wind risk and relevant wind power generation company will be required to account for this risk. The sources said investors who have been issued LoIs for wind power projects have expressed reservations at the new tariff mechanism announced by Nepra.
Unconfirmed reports suggest that with the announcement of new tariff mechanism, the LoIs issued by the Federal Government, Sindh Government and Punjab Government have been declared null and void. When a question regarding the status of LoIs issued so far to the investors was placed before the Chief Executive Officer (CEO) AEDB, Amjad Ali Awan, he said that Nepra cannot scrap LoIs issued to the investors by the federal and provincial governments.
"We decided that only those investors will participate in the bidding process with valid LoIs. Federal government, Sindh government and Punjab governments have already issued LoIs to the investors," he added. The government, he said, has to maintain its credibility in the market. Only investors with valid LoIs would be eligible to participate in the bidding process and require land for the project.
In reply to a question, he said that it would not be an opening bidding, adding that new investors would not be eligible to participate in the process. "If we feel that there is a need to modify existing wind power policy, we will go for it but will definitely honour LoIs," Awan added. Answering another question, CEO AEDB said that the Sindh government has issued around three dozen LoIs for wind projects whereas the LoIs issued by the federal government are very negligible. Punjab government has issued LoIs of 250 MW in Rojhan.
Awan, however, argued that the federal government would assess NTDC's power evacuation capacity prior to finalising the contract with the investors. Power sector has a grid code review panel comprising NTDC and Discos, which have information on power evacuation capacity.
"We are holding a meeting with NDTC to discuss its power evacuating capacity and new bidding will be based on the NTDC capacity. If we are told that power evacuating capacity is around 700 MW or 800 MW, we will go for bidding of this capacity but will accept lowest offers for estimated evacuating capacity and remaining offers will not be entertained," he said.