MUSHTAQ GHUMMAN

ISLAMABAD: Ministry of Water and Power has reportedly initiated an inquiry against Private Power Infrastructure Board (PPIB) for changing the status of 118MW Fatima Group’s Captive Power Plant (CPP) to Independent Power Producer (IPP).

A couple of weeks ago, Prime Minister Nawaz Sharif had directed the Ministry of Water and Power to initiate a probe and fix responsibility for changing the status of Fatima Energy Limited (FEL) from CPP to IPP.

Additional Secretary Water and Power, Dr Aamir Ahmad has been appointed the Inquiry Officer (IO) of the case and he is taking on other officers to assist in the probe.

Insiders challenge the credibility of an inquiry by an Additional Secretary against his own Minister who is also Chairman of the PPIB Board which, in turn, granted approval to change the status of the project which is selling power to CPPA on take and pay basis.

According to official documents, FEL’s 118.8 MW cogeneration power project was initially registered with the PPIB on August 23, 2010 under the National Policy for Co-Generation by Sugar Industry 2008 for setting up a 100MW Co-Generation power project. The project did not obtain tariff approval even after a lapse of three years and the registration was withdrawn on November 4, 2013 upon the FEL’s request.

FEL maintains that projects of 50MW are treated as CPPs whereas projects of 120MW are treated as IPPs.

According to MD PPIB, the company continued to develop the project independently without the umbrella of any GoP power policy and on September 11, 2015 informed the authorities that it had failed to secure bulk power purchasers of electricity. Further, FEL requested PPIB on September 11, 2015 to revert its 120MW cogeneration project (which at the time was expected to achieve Commercial Operation Date by June 2016) back to IPP mode under the Co-Gen Policy 2008. Subsequently, upon direction of the Ministry (based on the legal opinion of the Law Division), FEL once again registered with PPIB under the Co-Generation Policy on November 27, 2015.

The Board was apprised in February this year that earlier, on November 8, 2016, FEL communicated its acceptance of the Nepra-determined tariff to satisfy the requirement under the Co-Gen Policy 2008 to the fullest extent permitted against Nepra in the Islamabad High Court (IHC), seeking relief for compliance of GoP approved Co-Gen Policy.

The Board members deliberated the possible outcomes of further processing the project during the pendency of a writ challenging the tariff, GoP entering into Implementation Agreement (IA) and / or Power Purchase Agreement (PPA) as per the terms and conditions of Nepra-determined tariff. Other complexities including fulfillment of prerequisites and latest project development stage of FEL (ready for despatch) were also discussed. Further, various issues related to the project such as bar on processing of projects based on imported fuels, modalities and construction completed project, difference in provisions of Letter of Support (LoS) and generation licencee and availability of security package were discussed in detail.

PPIB finalised corresponding modalities to accommodate a construction completed project through slight modifications in the existing structure of project agreements. It was also discussed that allowing an under-construction/completed project may trigger similar requests in future from other investors/project companies.

It was highlighted that the Board’s earlier decisions for non-processing of private power projects based on imported fuel do not necessarily bar power project under the Co-Generation Policy 2008, since these are different in nature and scope. The required amendments in relevant Security Document (IA/PPA) were also noted to cover and provide the necessary framework for the project.

The Board was briefed that upon receipt of requisite fee and Performance Guarantee (PG) as per Co-Generation Policy 2008, the LoS was issued to the company on December 21, 2016 subject to ratification of PPIB Board. As per the LoS, FEL was required to fulfill all the requirements of FC by the June 21, 2017 deadline.

It was also revealed that in order to finalise IA and PPA with FEL, negotiations are in process based on ECC approved drafts of IA and PPA for coal-fired projects under Power Policy 2015 in accordance with Nepra’s determined tariff. The IA after negotiations will be submitted to PPIB Board or in case of increase in financial obligations of the GoP, approval of ECC may be sought.

Unconfirmed reports however suggest that the company seems to have already met an influential individual in Lahore and the issue was resolved in that meeting, and that the inquiry will merely confirm that nothing untoward happened.