Nepra approves Rs10.17 per unit tariff of RLNG power plants

Islamabad
National Electric Power Regulatory Authority (Nepra) on Friday approved Rs10.1767 per unit upfront tariff for RLNG based power plants with capacity to generate 250MW electricity and Rs9.3628 for plants having more than 450MW capacity.
However, the regulator has also forced the electricity consumers of RLNG power plants to pay Rs1.146 per unit as debt servicing for 10 years.
The cost of debt of 0.45% (LIBOR) plus a premium of 4.5% for foreign loans and 9.5% (KIBOR) plus a premium of 3% has been used for calculating debt servicing component of tariff for foreign and local loans. Savings, if any, in the premium will be shared between the power purchaser and power producer in the ratio of 60:40. The interest part of the debt servicing component of tariff will be subject to adjustment for change in LIBOR/KIBOR as the case may be and exchange rate in case of foreign financing. The principal repayment in case of foreign financing will also be subject to exchange rate adjustment.
The regulator determined and approved upfront tariff for RLNG power plants in exercise of powers under Section 7 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 read with Rule 3 of Nepra Tariff (Standards and Procedure) Rules, 1998 and Regulation 3 of the Upfront Tariff (Approval & Procedure) Regulations, 2011.The upfront tariff regime envisages to minimise the procedural processes, save time of tariff determination and reviews and to facilitate the investors in carrying out their due diligence regarding financial viability and acceptability of the tariff.
The delivered HHV (higher heating value) LNG price of $10.83 per million British thermal unit and lower heating value $12/mmbtu) to the IPPs was considered reasonable. In line with the present fuel price adjustment mechanism, the fuel cost component will be adjusted on account of variation in LNG delivered price to the IPP as and when announced by Oil and Gas Regulatory Authority (OGRA) or government of Pakistan.
The regulator says that all plant and equipment shall be new and shall be designed, manufactured and tested in accordance with the acceptable standards. Verification of the new machinery will be done by the independent engineer at the time of the commissioning of the plant duly verified by the power purchaser. The sponsor of the project can arrange foreign financing in American dollars, British pound sterling, euro, Japanese yen and Chinese yuan or in any currency as the government of Pakistan may allow.
It says that the upfront tariff has been determined on the basis of debt equity ratio of 75:25. Minimum equity requirement is 20%. There will be no limit on the maximum amount of equity; however, equity exceeding 30% of the total project cost will be treated as debt.
The debt part of the project can also be financed through mix of local and foreign financing and the debt servicing component will be adjusted accordingly. Interest income, if any, on Escrow Account will be created to the power purchaser through adjustment against the outstanding payments.
It explains that the choice to opt for upfront tariff will only be available up to six months from the date of its notification in the official gazette. The upfront tariff shall be applicable for projects established anywhere in the country. The applicant will have to achieve financial close within six months from the date of opting the upfront tariff. The upfront tariff granted to the applicant will no longer remain applicable if financial close is not achieved by the applicant within the stipulated time or generation licence is declined to the applicant. The plant availability will be 92%. The tariff control period will be 30 years from the date of commercial operation.