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October 21, 2020

KE nears 3-year RLNG supply deal for 900MW plants

Business

October 21, 2020

KARACHI: K-Electric Limited is nearing a three-year regasified liquefied natural gas (RLNG) supply deal with Pakistan LNG Limited (PLL) and Sui Southern Gas Company (SSGC) for 900 megawatts project under-construction at Port Qasim, its CEO said.

KE Chief Executive Officer Moonis Alvi told The News that the company also initiated talks with upcoming LNG terminals, including Tabeer Energy and Shell Consortium, to maintain gas supply afterwards.

Two existing RLNG plants have a total capacity of 1,200MW, of which government allocated 150 million metric cubic feet / day (mmcfd) capacity to KE’s 900MW RLNG-based plants.

“Government has informed us that we can use this excess capacity till 2025,” said Alvi. “After that there will be a new contract with a new terminal, and we may be bringing our own cargo. The plant’s requirement is 150mmcfd and we have to make arrangements for fuel supply once the contract with government is over.”

Alvi said the terms of financing have been finalised with SinoSure and Hermes Germany.

“Hopefully the financial close for the plant will be achieved next month,” he said.

“We are in the process of obtaining approvals and licences and then we will install a 2km line connecting SSGC’s transmission line to the plant.”

The project was conceived in 2016 and after the completion of feasibility studies it was approved and publicly announced in 2017.

Although the project timeline has been affected due to delay in finalisation of KE’s multi-year tariff, the power utility is determined to execute it on a fast track.

On recent revision in tariffs, KE chief said the government brought Karachi’s power tariff at par with the rest of the country and Karachi’s power consumers would now pay the same rate for electricity as consumers of other distribution companies do as per the national uniform tariff policy.

“However, this revision does not impact nearly 1.5 million consumers who constitute the most economically vulnerable consumer segments using up to 300 units per month,” he said.

An increase of Rs4.88/kilowatt hour was approved to ensure that the consumer-end tariff remains the same across Pakistan.

“The impact on consumers will only be up to Rs2.89/unit, while the rest of the increase will be adjusted via subsidy with effect from September 1,” he said. “Similarly the impact on residential consumers will be only Rs1.65/unit.”

Alvi said K-Electric’s quarterly adjustments have been pending for almost three years and net receivables due from various government entities ballooned to over Rs70 billion posing a threat to the company’s ability to finance operations and investments.

“In order to ensure continuity of power supply to Karachi, it is of critical importance that the company’s cash flows are not compromised and pending dues and receivables including monthly and quarterly cost adjustments are cleared at the earliest,” he said.