ZAHEER ABBASI
ISLAMABAD: National Transmission & Dispatch Company (NTDC) and Wapda have been unable to open a stand-by letter of credit during the last several years due to heavy exposure of banks to the power sector and the issue of circular debt, it was learnt.
Sources said that NTDC’s comments on a policy framework for on-site private power projects based on interim gas supply were solicited by Ministry of Water and Power. The question is whether payment to seller would be secured through an escrow account or by a stand-by letter of credit issued by a scheduled bank with a minimum credit rating of ‘AA’ plus. The comments received revealed that NTDC and WAPDA have been unable to open letters of credit for such payment to sellers during the last several years due to heavy exposure of banks to the power sector and the ongoing circular debt issue. Hence, this provision should only be included in the proposal if distribution/seller can ensure that they would be able to open the required L/C or escrow account, NTDC stated in its comments.
Ministry of Water and Power in coordination with the Ministry of Petroleum and Natural Resources proposes an interim utilization of over 200 MMCFD gas available at various gas fields which cannot be injected into the pipeline system in the near future due to the time required for establishment of gas production and transmission infrastructure. The natural gas will be available for a period ranging from 6 months to 3 years at producer prices between US$ 2.5-6.0 per MMBTU depending upon applicable Petroleum Policy. A policy framework submitted by Ministry of Water and Power was approved in a recent meeting of Economic Coordination Committee (ECC) of the Cabinet for implementation of power generation projects based on interim gas supply. According to policy framework, Ministry of Petroleum will provide details of the gas available, including: (i) name and location of gas fields; (ii) volume of gas available, specification of gas; and (iii) period of gas availability, and applicable wellhead gas price.
Ministry of Water and Power through relevant Distribution Company (DISCO) will select a power generation company (“seller”) on the single criteria of lowest delivered electricity tariff through a competitive bidding process. As per policy framework, the tariff for such power plants is envisaged to be comparatively cheaper than other thermal fuel such as furnace oil and HSD. However, such determination would be made by National Electric Power Regulatory Authority (NEPRA) while approving tariffs and a Request for Proposal (RFP) and an Energy Purchase Agreement (“EPA”) on a take and pay basis would be drafted by NTDC/Discos and approved by the Nepra.
In case of commitment of any financial obligation or liability on the part of government, these will be placed before the ECC for consideration: The seller’s responsibilities would include: (a) that it will enter into a Gas Supply Agreement for supply of gas at gas field with the gas field licensee or lessee. To secure payment of gas supplies, the seller will provide a Bank Guarantee or Stand-by Letter of Credit issued by a scheduled bank with a minimum credit rating of AA+; (b) the seller will enter into an EPA with the electricity buyer, i.e., relevant distribution company, buyer’ to be designated by the federal government, delivery of power will start within 120 days of signing of EPA. The term of EPA shall be commensurate with the term of the GSA; (c) the seller will be responsible for the financing of the project and there will be no implementation/Concession agreement, sovereign guarantee and mobilization advance by the government or DISCOs; (d) the seller will be responsible for financing arrangement of all interconnection transmission lines and other facilities to he constructed by the buyer between the seller’s substation and the buyer’s substation or other delivery point to be identified in instructions to bidders. The feasibility of grid interconnection will be determined by concerned Disco/NTDC; (e) the seller shall be responsible for procurement of site, seller’s infrastructure, importation, setting up, operation, maintenance and exportation of plant, machinery and equipment; (f) however, DISCO may carry out the construction work as ‘Deposit Work’/contractor for them subject to applicable rules. Ownership of transmission lines after seller’s substation will be transferred to buyer free of cost at the time of expiry of EPA. Metering for power delivered will be done at Seller’s substation; (g) evaluation Committee will be constituted to evaluate the offered tariff based on International Competitive Bidding. Evaluation committee will submit the offered tariff to Nepra for approval prior to acceptance of such tariff by the Disco/GOP. Such approval will be provided by Nepra within ten (10) days of submission; (h) the tariff will be a single composite tariff without any capacity of fixed charges on take and pay basis on a per unit basis for energy delivered to the grid. The tariff offered by the bidders will include all costs, taxes and expenses as there will be no adjustments, indexations and pass through on any account; (i) the seller will comply with all licensing requirements as stipulated in the electricity generation license to be issued by Nepra, such generation license will be issued within 10 days of submission of completed application by seller.
Buyers Responsibilities include: (a) the buyer will be responsible for provision of all interconnection facilities at its substation or other delivery point including switchgear and ancillary equipment; (b) the payments to Seller will be secured through an escrow account or by a stand-by letter of credit issued by a scheduled bank with a minimum credit rating of AA+; (c) the EPA will be based on a “take and pay” provision. The Buyer will be obligated to purchasing all the energy delivered by the seller.
