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August 15, 2019

National Power Parks seeks modification in RLNG plants tariff

Business

August 15, 2019

KARACHI: National Power Parks Management Company (NPPMC) has approached the National Electric Power Regulatory Authority (NEPRA), seeking modifications in the reference tariff for its RLNG-based power plants prior to actualisation/one-time adjustment of tariff, as the government has decided to divest its stake in the company, a document revealed.

Privatisation Commission of Pakistan has initiated the process to privatise 1,223MW RLNG power plant at Balloki and 1,230MW RLNG-based plant at Haveli Bahadur Shah.

Accordingly, the government advised the National Power Parks to file petition for actualisation/one-time adjustment of tariff.

However, before filing the petition, the company is of the view that certain cost components need to be modified so as to arrive at a just, fair and informed determination pursuant to one-time adjustment of reference tariff.

The National Power Parks has sought approval of additional costs, as the construction period exceeded the approved 27 months along with the approval of reimbursement of the cost of funds arranged for payment of advance income tax.

The National Electric Power Regulatory Authority (NEPRA) had determined that in case the company is obligated to pay any duties and/or taxes, not being of refundable nature, the exact amount paid by the company on these accounts will be reimbursed on the production of original receipts.

In its determination dated August 9, 2016, NEPRA had allowed return on equity (ROE) at 16 percent, which is the income of the company on which income tax is to be calculated and paid.

Accordingly, when income tax is estimated for the purposes of payment of advance tax, a significant amount is required to discharge the tax liability, whereas the reimbursement starts only after 18 months and the power purchaser does not pay the capacity charges on timely basis; therefore, the company has to arrange the hefty amount of cash flows on quarterly basis in order to discharge its advance tax liability.

Currently, the cost of funds arranged by the company for payment of advance income tax is not provided in the determination dated August 9, 2016.

The operator of two RLNG-based power plants has also requested the approval of cost of back feed electricity as pass through item on actual basis, as well as approval of the insurance cost during operations as per the actual without any capping.

The government in December last approved privatisation of two RLNG power plants, which include the 1,223MW combined cycle power plant at Balloki, Kasur and 1,230MW plant at Haveli Bahadur Shah, Jhang.

The power plants are currently held by the National Power Parks Management Company (Private) Limited, which is wholly owned by the Ministry of Water and Power. The government is expecting to generate $2 billion by privatising these power plants.

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