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August 8, 2018

SNGPL encashes Rs14 bn bank guarantees of three RLNG power plants

Top Story

August 8, 2018

ISLAMABAD: In a major development, Sui Northern Gas Company Limited (SNGPL) has swung into action and showed the muscle by en-cashing the Rs14 billion bank guarantee of three RLNG power plants for non-payments against use of imported gas.

The gas company has taken the extreme step to avoid bankruptcy, a senior official of the SNGPL told The News. The SNGPL has en-cashed the bank guarantee of three LNG based power plants at Haveli Bahadur Shah, Balluki and Bhikki having capacity to generate the electricity of 3,600MW for being defaulters on RLNG payments. Under the agreement, the three power plants failed to pay the payments against the usage of the RLNG which is why SNGPL en-cashed the bank guarantee of Rs14 billion.

Top official of National Power Parks Management Company (NPPMC) that looks after the affairs of RLNG Power Plants at Haveli-Bahadur Shah and Balluki confirmed the development, saying that as per Gas Sales Agreement (GSA) approved by Ogra, the action by Sui Northern is justified. As per the agreement, on January 18, RLNG power plants were to come on stream but all delayed up to April and May. The Sui Northern had provided the RLNG, but power plants were not ready to use the RLNG, so the gas company has en-cashed Rs10.5 billion of Haveli-Bahadur Shah and Balluki. He said that it were the Chinese EPC contractors who delayed the projects so NPPMC had asked the EPC contractors to pay the Liquidity Damages of Rs13 billion. Once the Rs13 billion are paid both the projects will have no loss in net effect.

As far as Bhikki RLNG power plant is concerned the official said this plant is facing the working capital issue and Sui Northern has also en-cashed its guarantee of Rs4 billion.

The top official said that in the month of January, the re-gasified LNG, which was not used by three RLNG power plants, had to be diverted to the domestic sector in Punjab. The SNGPL, the official said, has recently closed down the supply of RLNG to Nandipur on non-payment of Rs1.5 billion and it restored the supply when the payment of the said amount was made. So much so the said gas company has also halted supply of RLNG to Pakarab Fertilizer Limited for non-payment of Rs2.5 billion to Rs3 billion and the matter is in the court. The top management which is very sensitive over recovery of the dues against utilisation of RLNG has also started the process to en-cash the Rs5 billion bank guarantee of Kapco power plant.

The official said since the power sector is quite inefficient in terms of recovery of the dues which is why SNGPL has started en-cashing the bank guarantee of the power plants which are using the RLNG. "Right now Sui Northern is supposed to pay dues Rs25.4 billion to Pakistan State oil (PSO) against the LNG import. At present there are 15 power houses which are using the RLNG for power generation."

However, the official documents available with the News unfold that RLNG based power generation cost hovers at Rs7-8 per unit if compared with the electricity generation cost on furnace oil that stands at Rs13.50 per unit. So the RLNG role has started yielding dividends and to this effect the country has saved $3 billion just by replacing the furnace oil powered plants, which are running at 28-30 percent of their capacity, generating electricity at an average cost of Rs13.50 per unit if compared with electricity generation by RLNG at Rs7.50 per unit.

The share of electricity generated with input of RLNG as fuel stands at 6,450MW, which will increase in the months to come. Under the government policy, the power plants based on furnace oil and diesel will be phased out, but under the new scenario, the influential lobby of diesel and furnace oil (FO), with connivance of top mandarins of petroleum and power divisions, has started discouraging the running of RLNG power plants. “Instead, furnace oil based power plants are being encouraged. This will add Rs20-30 billion more burden on electricity consumers per month.”

Since Shahid Khaqan Abbasi is no more the prime minister, the furnace and diesel lobby has become more vibrant and managed to get approved from the higher authorities to run their projects on priority basis. “This will add miseries to the end consumers as it will help increase the basket price of electricity manifold.”

The electricity unit cost by furnace oil-run thermal plants is double the cost of power generated with RLNG as fuel. The furnace oil lobby, the top official said, has grown strong enough that it has started influencing the top officials in the departments as they are showing hesitance as to how much the demand of LNG will be in next two months. “This has left state-owned Pakistan LNG Limited and PSO in the lurch as four months are required to complete process for placing orders to import more consignments of LNG,” the official said.

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