ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday cut 30-year levelised upfront tariff for new bagasse-based power plants by more than 23 per cent.

In its determination, the regulator reduced the tariff for 30 years to Rs7.97 per unit (kWh) against Rs10.4078 per unit fixed in 2013. The 2013 upfront tarif f was originally announced for one year but extended repeatedly to May 2017 that contracted a total bagassebased power generation capacity of about 940 megawatts.

The reduction was materialised through a 25pc cut in average tarifffor ñrst10 years and a 20pc saving over the next 20 years. As such, the initial 10-year tariff was reduced to Rs8.86 per unit from previous rate of Rs11.76 per unit.

Likewise, the tariff for 11-30 year tariff was scaled down to Rs6.32 per unit compared to previous rate of Rs7.915 per unit.

This was made possible through increase in plant efficiency factor to 28.4pc for future projects compared to 24.5pc efficiency the plants under previous tariff would enjoy for 30 years.

The project cost was kept almost unchanged at $0.9966 per megawatt but plant factor was also enhanced to 55pc compared to previous benchmark of 45pc .

Also, the debt financing cost has been reduced to 1.75pc plus Kibor against previous Exed rate of 6pc while the internal rate of return (IRR) has been kept unchanged at 17pc.

The new tariff did not put a cap on induction of new bagasse-based cogeneration projects but required that investors (sugar mills) would have to lock in these rates within one year.

The upfront tariff will be applicable for all new cogeneration projects using bagasse along with other biomass and would need to be recommended by the Alternative Energy DevelopmentBoard(AEDB) or otherrelevant agencies.

The companies would be required to certify that all the plant and machinery to be installed will be new and of international standards and have consent of the power purchaser le National Transmission & Desptach Company (NTDC) to purchase electricity.

The decision to opt for upfront tariff once exercised will be irrevocable and the companies will have to achieve Enancial close within six months from the date of approval of their upfront tariff by Nepra.

The upfront tariff granted to any company will no longer remain valid if ñnancial close is not achieved within six months or a generation licence is declined to that company. The targeted maximum construction period after financial close would be 18 months.

No adjustment will be allowed in this tariff to account for financial impact of any delay in project construction. However, the failure of a project to complete construction within 18 months of financial close will not invalidate the tariff granted to it.

The projects interested in availing upfront tariff will submit unconditional formal application to the regulator for approval of its upfront tariff. The projects opting the new tariff shall secure debt under the concessionary financing scheme of State Bank of Pal(istan. This tariff shall be allowed on the approved terms of commercial financing only after availing the option of financing under the SBP scheme.All energy offered for sale by the cogeneration projects, to the extent of approved plant factor, shall be taken by the power purchaser on priority basis. The energy offered beyond set plant factor shall be procured as per the principles of economic dispatch.

Variable component of tariff includingfuelshallnotbe paidfor the energy not dispatched by the power purchaser both during season and off-season.

The company would attract penalty for failing to fulfil its commitment of making the declared capacity available during season and off season and the power producers shall have the option to offer energy to the respective distribution company (Disco) at 11kV or 132kV, or to the CPPA/NTDC at 132 kV, provided that the cost of interconnection, grid station upgrades etc. for power evacuation shall be incurred by the respective purchaser.