ISLAMABAD: Siddiqsons Energy Limited (SEL) has approached Prime Minister Shehbaz Sharif against the PPIB’s decision to cash the guarantee and resolve other issues.
The Prime Minister’s Office (PMO), in a letter written on June 23, 2022 to Secretary Power, requested a report from the Electricity Division on the issues mentioned by the power company within three days.
SEL was granted a generation license for the development of a 350 MW imported coal-fired power plant in Port Qasim, Karachi and opted for an initial tariff on imported coal in July 2015 and the Letter of Support (LoS) from the PPIB was acquired in August 2015. Later, on the advice in February 2016, the GoP requested SEL to replace imported coal with local coal as the main fuel. The company secured the First Amendment and Extension of the LoS in October 2016 and secured the tariff for local coal in Port Qasim, Karachi.
On the advice of the GoP, the company decided to move the project from Port Qasim to Tharparkar district and obtained the necessary approvals. NEPRA announced the new initial tariff regime in July 2017.
SEL applied for the new lowest initial tariff which was approved by the authorities in January 2018. This led to the execution of the project documents and SEL successfully executed the Power Purchase Agreement (PPA) and the Implementation Agreement (IA) in March 2018.
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According to company chairman, Tariq Rafi, once transferred to Thar Coal, SEL faced many challenges including signing a coal supply agreement (CSA), a Land Lease Agreement (LLA) and Water Use Agreement (WUA). These documents were signed in December 2019.
The company was expected to complete the financial close project by February 2020. However, it was delayed due to the pandemic (Corona Virus) globally, as well as in Pakistan, which affected all parties involved in achieving of the financial close. As a result, the final approval process for lenders has been halted (including approval from China Development Bank to United Bank Limited).
The company says it has already invested more than $20 million in equity in the development of the project and is still committed to developing the project to help the country in its efforts to overcome the energy crises and have electricity the most. cheaper to the National Grid System. using indigenous coal from the Thar coal mine.
SEL maintains that their project has great potential with excellent fundamentals being in the best order of merit (in the top 3). The coal-fired power station at Thar involves a saving of around $230 million per year due to coal imports. SEL will provide savings of $48 million per year through the reduction in the average price of Thar coal.
The current fuel cost element of imported fuels/fossil fuels ranges from Rs. 30 Kwh to Rs 40 Kwh. However, using indigenous Thar coal, the fuel cost for this plant would be Rs 2.5/KWh. This will also help reduce bulk fuel imports, which are currently causing power cuts in the country.
Tariq Rafi, in his letter, informed the Prime Minister that despite the savings on foreign exchange remittances and the high merit of the project, the lenders showed their inability to fund the project to reach financial close due to the huge circular debt of the electricity sector which has accumulated up to 2.5 trillion rupees.
“In order to salvage the project and allay lender concerns over project debt repayment, the company has entered into discussions with K-Electric to supply cheap electricity from the Thar coal-fired power station to the KE grid. . Under these agreements, lenders are comfortable and willing to arrange the debt financing required for the project. All other dynamics of the project will remain the same except for the tapping of the cheapest electricity which will be supplied to residents of Pakistan through the K-Electric grid,” he continued.
Chairman SEL requested support from the PMO for the following actions: (i) direct NTDC to sign a contract with the company for the distribution of power from the plant to the K-Electric transmission system; and (ii) direct PPIB to hold the collection of the project guarantee until the Company obtains financial close of the project with KE and the bank guarantee once financial close has been achieved.
Copyright Business Recorder, 2022