Govt’s liability will increase as Fatima Energy is converted from a captive power plant to an IPP
ISLAMABAD: Prime Minister Nawaz Sharif has directed the Ministry of Water and Power to initiate a probe and fix responsibility for the change in status of Fatima Energy Limited from a captive power plant to an independent power producer (IPP).
“The premier has called for initiating appropriate action in this case against all the officials concerned including those associated with the Private Power and Infrastructure Board (PPIB),” a senior government official said while talking to The Express Tribune.
Under the co-generation policy of the government, Fatima Energy was incorporated as a special purpose vehicle. The company was originally set up by Fatima Sugar Mills as a captive power plant for energy supply to the bulk consumers.
Later, Fatima Energy applied for switching its status from the captive plant to an IPP. The company was then registered as an IPP with the PPIB for setting up a 118.8-megawatt co-generation (bagasse and imported coal-based) plant.
After registration, Fatima Energy filed a tariff petition and the National Electric Power Regulatory Authority (Nepra) announced a levelised tariff of Rs7.83 per unit on ‘take-and-pay’ basis.
According to the government official, the PPIB, in its meeting held on February 15, 2017, agreed on the issuance of the Letter of Support to the Fatima Energy co-generation power project.
It suggested that after negotiations an implementation agreement should be submitted to the PPIB or in case of increase in financial obligations of the government, the Economic Coordination Committee’s (ECC) approval may also be sought.
Consequently, a project-specific implementation agreement and power purchase agreement were finalised after talks with Fatima Energy by the PPIB and Central Power Purchasing Agency (Guarantee) Limited respectively on take-and-pay basis.
The PPIB also noted that the government’s obligations had not increased following the agreements.
The matter was taken up in a meeting of an inter-ministerial committee on June 5, which recommended that approval of the Cabinet Committee on Energy should be sought to add 118.8MW to the national grid immediately.
According to the official, the conversion of a captive power plant to an IPP is against the law as these are two completely different types of projects developed under different policies.
The tariff allowed to the captive power plants is generally higher due to claims of higher capital expenditure. However, electricity from the captive plants is not added to the national grid. Moreover, there is no government guarantee for such plants.
The official pointed out that if the take-and-pay arrangement was put in place, the court, where a case of Fatima Energy was pending, would issue directives for paying capacity charges to the company as the government was the electricity buyer.
Published in The Express Tribune, June 16th, 2017.