News
Saturday, August 27, 2011
Nine IPPs serve notices to govt on default in payment of Rs 31bn* IPPs Advisory Committee Chairman Abdullah Yousaf says remaining power plants are about to serve notices on call of sovereign guarantees
By Sajid Chaudhry
ISLAMABAD: Power crisis in the country is set to deepen further as nine independent power producers (IPPs), with 1,800 MW power generation capacity, served notices on the government and Central Power Purchasing Agency (CPPA) on Friday to revoke sovereign guarantees on default of payment amounting to Rs 31 billion.
Abdullah Yousaf, IPPs Advisory Committee chairman, announced during a briefing at a local hotel that nine power producers had served notices on the government, whereas the remaining power plants were about to serve notices on the call of sovereign guarantees due to circular debt issue.
“IPPs are running on day to day basis with monthly billing to PEPCO amounting to Rs 56 billion. They are receiving 50 percent amount,” he said, adding that power purchaser was bound to pay 18 percent penal surcharge in case of delay in the payment as per agreement which NEPRA disallowed.”
PEPCO paid Rs 26 billion penal interest to IPPs last year.
“But under an agreement with power purchaser, it can also charge penalty if IPPs do not provide electricity in case of non-provision of fuel,” he said, adding that IPPs were now against the wall.
An agreement between four power plants with 900MW power generation capacity and Sui Northern Gas Pipeline’s Limited (SNGPL) had terminated on June 30, 2011 and the former could eventually go to termination of contracts if gas was not arranged for them.
He said that SNGPL had served notice on these IPPs to suspend fuel supply from August 28 due to shutting down of the Qadirpur gas field.
“These plants have efficiency of 51 percent compared 16 to 35 percent of GENCO’s,” he said, adding that due to the present curtailment of gas to these IPP’s, annual additional cost of running on HSD was estimated at around Rs 120 billion which required 10 per cent increase in power tariff.
He said that historically the fuel mix for power sector was 70 percent hydel and 30 percent thermal, which kept the cost of electricity at the lowest level. “Over the year, unfortunately, this equation has reversed and presently almost 70 percent electricity is through the thermal system and 30 percent from hydel,” Yousaf said, adding that cost of hydel electricity was almost Rs 1/kwh, gas fuel costs almost Rs 4/kwh and then furnace oil fuel cost was about Rs 12/kwh and the diesel based around Rs 16/kwh.
“Despite an increase in the rates of electricity over the period, there is still a cost differential of almost Rs 2/kwh which the government is supposed to pay as subsidy,” he said, adding, “Presently this amount is estimated at around Rs 190 billion per annum.”
Yousuf said that cash shortfall was Rs 170 billion due to structural and governance issues of PEPCO.
“The government pays Rs 350 billion per year on account of subsidy and structural issues of PEPCO,” he said, adding that due to this, the government had paid Rs 1 trillion during the last three years.
At present, PEPCO is to pay Rs 280 billion to power sector and out of it, 29 IPPs are to receive Rs 211 billion,” Yousuf said, adding that this amount is overdue for the last two to nine months in violation of contractual obligations. PEPCO’s recovery of bills is 82 percent and current receivables of PEPCO and the gap due to less recovery also causes circular debt.
Courtesy www.dailytimes.com.pk