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November 11, 2016

Ban on imported coal power generation likely to shelve projects

Business

November 11, 2016

KARACHI: Government ban on power generation from imported fuel may shelve a number of planned coal-fired power projects as investors are either mulling capacity cut or abandoning of their plans, sources said on Thursday. 

The sources said at least two local investors with cumulative generation capacity of 1,000 megawatts are in a fix following a shift in government policy on imported coal.  Siddiqsons Energy planned to set up a 350MW plant at Port Qasim, while Lucky Energy intended to build a 660MW coal project.

An official, belonging to an independent power producer, said the Pakistan Power Infrastructure Board (PPIB) issued letters of support (LoS) to set up the project on imported coal.

“We contracted the engineering, procurement and construction (EPC) firm based on this,” the official said on condition of anonymity. “Now, the government wants the projects to be on indigenous coal despite the fact that terms couldn’t be changed after the LoS issuance.”

The official said the PPIB granted one year LoS extension to Siddiqsons Energy and Lucky Energy on the condition that the projects would be set up on local coal. In July, the government decided to ban power plants based on imported fuel, including oil, high speed diesel, liquefied natural gas and coal as the projects, already at various stages of developments, are to inject 13,207MW power by 2018. 

The government also planned to bring in 3,960MW of coal-fired plants (both local and imported) by the end of 2018.  Therefore, the government believed that no further financial commitments for purchasing power produced on imported fuels are justified.

Local IPPs find Thar coal unviable for the plants to be established on mine mouth. “Thar lignite has heating values lower than half of the imported commodity, and this would raise the transportation cost by $25/tons,” the official said.

Hubco had already brought down its proposed coal power generation capacity to 660MW from 1,320MW following the government decision.  The sources said Siddiqsons and Lucky Energy are weighing whether or not to go ahead with their original plans with the local substitute.

They, however, said Siddiqsons was renegotiating their terms with the EPC to modify the plant’s specifications to suit Thar coal. Lucky Energy has yet to hire the EPC contractor, they added.

Experts said the government should have addressed inefficiencies of power generation companies instead of banning imported coal, which is a cheap and efficient source of power.

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