Thar Coal Power Project Gears Up for Bidding: K-E Joins the Fray

The Private Power and Infrastructure Board (PPIB) has decided to initiate International Competitive Bidding (ICB) for the 330 MW Thar coal power project.

The Private Power and Infrastructure Board (PPIB) has decided to initiate International Competitive Bidding (ICB) for the 330 MW Thar coal power project.

The project, developed by M/s Siddiqsons Energy Limited (SEL), is set to undergo a transition in off-takers, with K-Electric (KE) stepping in as the new private power purchaser, eliminating the need for a Government of Pakistan (GoP) guarantee. Official sources revealed this information to Business Recorder.

According to sources, SEL, the developer of the Thar coal power project, had been granted eight extensions in the Financial Closing (FC) date, the last of which expired on December 31, 2021. Despite multiple extensions and amendments to the Letter of Support (LoS), SEL failed to meet the necessary formalities. The failure to double the Performance Guarantee to $7 million and submit the FC Date extension fee led to the encashment of the Performance Guarantee amounting to $3.5 million by PPIB on August 2, 2022.

Following this, an agenda was presented to the PPIB Board on August 17, 2023, to terminate the LoS formally and discuss SEL’s proposal for selling electricity to K-Electric as a new power purchaser. The Board constituted a Special Technical Committee (STC) with specific Terms of Reference (ToRs) to analyze the potential transition. The STC, in its meetings on September 4, 2023, and September 28, 2023, focused on evaluating the pros and cons of SEL selling electricity to KE instead of CPPA-G.

The National Transmission and Dispatch Company (NTDC) assessed the system requirements, power evacuation, and transmission capabilities with KE as the power purchaser, taking into account the impact on HVDC and the existing transmission network. The Central Power Purchasing Agency-Guarantee (CPPA-G), in coordination with KE, prepared a detailed report on the induction of SEL’s project into KE’s system, considering its impact on the basket price of CPPA-G and KE separately.

The STC finalized its report, considering analyses from CPPA-G and NTDC. The findings highlighted that without FC, the Power Purchase Agreement (PPA) is not effective in its entirety, potentially impacting the recoverability of HVDC Late Delivery Schedules (LDs).

NTDC’s opinion, even if the PPA is not fully effective, asserted that NTDC fulfilled its contractual obligations according to the PPA, justifying the recovery of LDs. Additionally, changes in market dynamics since SEL adopted NEPRA’s upfront tariff in 2018 were noted, with revised tariff parameters.

Following the ToRs set by the PPIB Board and directives from the Special Investment Facilitation Council (SIFC), the STC recommended proceeding with ICB for the Thar Coal Power Project’s sale of electricity to KE without a GoP guarantee.

Simultaneously, it proposed the cancellation/termination of SEL’s LoS, with PPIB conducting the bidding on behalf of KE as the Independent Auction Administrator (IAA). A detailed feasibility study, including power evacuation and a system impact study, was recommended before initiating the bidding process.

In a subsequent development during the sixth meeting of the Executive Committee of the SIFC on October 23-24, 2023, held at the Prime Minister’s Office, it was decided to shift the off-taker of the 330 MW SEL coal power project from CPPA-G to KE without government guarantees. PPIB was entrusted with conducting a round of competitive bidding on behalf of KE.

Given SEL’s default and the encashment of its Performance Guarantee, the PPIB Board has been requested to formally terminate SEL’s LoS, enabling further proceedings for ICB.

Approval is also sought to register KE, a private sector power distribution entity, as the Power Purchaser for the Thar Coal Power Project. The move signifies a crucial shift in the project’s trajectory and underscores the evolving landscape of Pakistan’s power sector.