PPIB disallows Sindh Gov to from jv for power project

Islamabad: The Private Power Infrastructure Board (PPIB) has barred the Sindh government from entering into any joint venture with investors for a 1000 MW coal-fired power plant without prior consultation with the power purchaser.

The Sindh government had alleged in a letter to the federal government that a conspiracy was being hatched at the federal level against the much needed development of an integrated coalfield power plant project. The 'insensitive handling' of a Chinese company, the Shenhua Group, which led to its withdrawal from the process, was cited as the reason.

'We understand that before finalising the joint venture with the investors, the Sindh government must discuss major issues with the power purchaser so as to generate support from the power purchaser for the proposed joint venture,' said PPIB Managing Director Fayyaz Elahi, in a letter to Mines and Mineral Development Secretary Younus Dagha.

The PPIB was informed that the Sindh government recently guaranteed coal supplies at a price higher than the three different pricing references.

In case of non-absorption of guaranteed coal supplies, the Sindh government would pay liquefied damages (LDs) of Rs 300 per ton, which is said to be a good incentive to attract investors.

The PPIB, however, is of the view that to avoid incurring LDs, the Sindh government and the PPIB would have to try synchronising the commissioning of power plant with the start of commercial mining, the sources added. The Sindh cabinet, a couple of months ago, had reviewed progress on all mega projects, including the Thar coal project, noting that despite best efforts of the government and completion of the corresponding infrastructure, the project had not moved forward.

'Agencies at the federal level have not been supportive, on the contrary, frivolous and fictional impediments are being created in allowing upfront tariff, which is the only way forward for integrated coal-fired power plants,' the sources quoted the Sindh government as saying in the letter.

Pakistan has not been able to exploit its coal reservoirs for power generation, as World Development Indicator of the World Bank, 2008 reveals that coal share in power generation remained stagnant, 0.1 percent, from 1990 to 2005 whereas India has been heavily relying on coal for electrify production with 66.2 percent in 1990 that was enhanced to 68.7 percent in 2006.

Fayyaz Elahi also said that coal without guarantees for firm off-take would also be required four to six months earlier than the actual commissioning of the plant during the testing phase of the power plant.

The PPIB also believes that information memorandum prepared by the provincial government promised certain incentives which would have a direct impact on the power purchase agreement (PPA) and all the costs would be eventually passed onto the power purchaser.

'Coal pricing formula would have a direct bearing on the dispatch ability of the power plant, and the resultant ballpark figure for minimum take or pay,' Fayyaz Elahi added.