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    Nepra to hear Chinese company's petition for hike in EPC cost on Dec 1


    November 22, 2022 - Nation

     

      National Electric Power Regulatory Authority will hear the petition of CIHC Pak Power Company Limited (CPPCL) for a hike in EPC (engineering, procurement and construction) cost of 300MW Gwadar coal-fired power project to $403 million (up by 25.38 percent) on December 1. In its petition for modification/revision in tariff for 300MW coal-fired project in Gwadar, the company has also sought 21.43pc hike in return on equity (RoE) and requested the regulator to allow upward adjustment of Internal Rate of Return (IRR) to 17pc from the earlier determined 14pc. As per the petition submitted to NEPRA, the Chinese company has requested an increase of $82 million in EPC cost. CIHC Pak Power Company Limited (CPPCL) is setting up the 300MW coal-fired power plant in Gwadar, Balochistan. The company had requested a hike of 25.38pc in the EPC cost of the project from the earlier revised determined $321.41 million to $403 million. Originally, NEPRA had allowed EPC of $236.13 million for Gwadar coal project, which was later revised to $321.41 million. Now, the Chinese company wants another upward revision in the cost. The petitioner also requested the regulator to remove the provisions limiting the project cost indexation to a specific PKR rate i.e. 105/USD. The CPPCL requested that Sinosure fee at actual under a Buyers Credit Insurance be allowed subject to maximum of 7pc of debt servicing. The petition requested the authority to include the financial guarantee as part of the annual recurring costs at rate of 0.9pc of the guaranteed amount applicable in a particular year. The Chinese company sought an increase in the project development and sponsor's cost to $47.87 million against the allowed amount of $10.50 million. The petition requested that the API-4 may be kept as the base index for the determination of coal price as outlined in the authority's fuel pricing mechanism dated 23rd September 2016. The petition also sought clarification on taxes and duties. The petition requested to allow increase in O and M cost of $17.43 million against allowed amount of $12.71 million. The company has also requested for allowing Buyer's Credit Policy for Sinosure fee. Earlier, in the revised determination, NEPRA had allowed Overseas Investment Insurance Policy. In its original petition, the petition requested $369.89 million on account of EPC comprising offshore portion of $250.16 million and onshore portion of $119.73 million. The EPC cost includes costs of procurement, engineering design, site preparation, construction of boundary wall, access road, bridge on river/creek, temporary facilities, main plant (including import, installation, erection, completion, commissioning of boiler, turbine and generator), balance of plant (electrical and mechanical equipment and systems), control and metering, civil works, coal handling system, ash handling system, on-site ash disposal system, seawater intake and outfall channels, black start generator, desalination plant, electrostatic precipitator, selective catalytic reduction ('SCR') to capture NOx, colony, project management, erection and commissioning, security costs and security personnel accommodation. Originally, NEPRA had allowed the EPC cost of $236.13 million for 300MW coal-fired power plant in Gwadar. The regulator had allowed the Chinese company a tariff of Rs6.96 per unit for the project. Based on the CIHC Pak Power Company Limited (CPPCL) petition, NEPRA has framed questions for consideration in the hearing scheduled on December 1, 2022. The questions raised by the regulator are: Whether there is justification to seek tariff on imported coal when the extension in FC by PPIB is subject to the condition that the project would be converted/shifted on local (Thar Coal)? Whether there is a justification to approve a new project on imported coal when the existing projects are being considered for conversion on local coal with additional modification costs of the existing plant and machinery? Whether the requested EPC cost of $403 million against the approved cost of $ 321 million is justified? Whether the request to remove the provisions limiting the project cost indexation to a specific PKR rate i.e. 105/ USD is justified? Whether the requested Sinosure Fee at actual under a Buyers Credit Insurance subject to maximum of 7pc of debt servicing is reasonable and justified? Whether the request to include the financial guarantee as part of the annual recurring costs @0.9pc of the guaranteed amount applicable in a particular year is reasonable and justified? Whether the requested project development and sponsor's cost of $47.87 million against approved cost of $10.50 million is justified? Whether the request to kept API-4 as the base index for the determination of coal price as outlined in the Authority's fuel pricing mechanism dated 23rd September 2016 is reasonable and justified? Whether the request to apply taxes and duties clause of upfront tariff in the instant case is justified? Whether the request to allow upward adjustment of IRR to 17pc from 14pc is justified?

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