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Kapco seeks renewal of agreement with new tariff

By Kazim Alam 2022-10-25
KARACHI: Kot Addu Power Company Ltd (Kapco) said on Monday it has submitted a tariff petition to the National Electric Power Regulatory Authority (Nepra) for a reference generation tariff.

The independent power producer (IPP) made the announcement as its original power purchase agreement (PPA) of 1996 completed its term on Oct 24. As a result, the operator of a multi-fuel-powered plant of 1,600 megawatts will not be able to sell electricity to the sole power purchaser under the original PPA.

However, the IPP recently received its renewed power generation licence by Nepra for three years. Now the company and theCentral Power Purchasing Agency (CPPA) have agreed to sign a new PPA for the sale and purchase of electricity, it told investors.

`The term of the new power purchase agreement is being proposed by the company to be five years.

Additionally, Kapco has requested Nepra to grant it a provisional tariff approval as the regulator has yet to arrive at a determination with respect to the tariff petition.

Kapco`s CEO noted in the financial accounts released early this month that the company is `very optimistic` for the sale of electricity to the power purchaser beyond Oct 24, the last day of its original PPA.

However, he noted, the counter-party `may take time to complete the deal` The company`s auditors have highlightedthe pending renewal/extension of the PPA as material uncertainty without qualifying their report. The going-concern uncertainty of the company is mitigated, according to the CEO, because of the recent operating profile of the power plant.

The actual generated electricity for 2021-22 at the load factor of 42.4 per cent was over six times higher than the projecte d generation in the approved Indicative Generation Capacity Expansion Plan, which envisaged a load factor of 6.9pc.

Even though the term of the recently renewed generation licence will expire in September 2024, its requirement will cease to exist with effect from April 2023, subject to the implementation of the Competitive Trading Bilateral Contracts Market the planned wholesale market for the tradingof electricity units.

Electricity production by Kapco increased 40pc in 2021-22. Its fuel mix during the year was 36.3pc on gas, 62.6pc on low-sulphur furnace oil and 1.1pc on highspeed diesel.

Last year, Kapco signed an amendment to its PPA, according to which, plant outages due to fuel shortages between 2008 and 2016 were to be treated as `other force majeure event`.

Consequently, the term of the existing PPA was extended. It agreed to waive off any right to receive capacity payments in lieu of those capacity payments already received during the outage period.

The company recorded earnings of Rs9.8 billion in 2021-22, down 3.3pc from a year ago.