KAPCO, Govt to Sign New PPA

ISLAMABAD: The Kot Addu Power Company Limited (KAPCO) is reportedly close to signing a new Power Purchase Agreement (PPA) with the Government under updated terms and conditions. Following this, an addendum to the earlier tariff petition will be filed with the National Electric Power Regulatory Authority (NEPRA) to resume plant operations, well-placed sources told Newzshewz.

KAPCO, which recently appointed Shahab Qader Khan as its new Chief Executive Officer, is Pakistan’s largest Independent Power Producer (IPP) with a nameplate capacity of 1,600 MW. The power plant consists of 10 multi-fuel gas turbines and 5 steam turbines, installed in five phases between 1985 and 1996. These turbines are grouped into three energy blocks, each combining gas and steam turbines. The plant’s combined-cycle technology utilizes waste heat from the gas turbines to produce steam in a Heat Recovery Steam Generator (HRSG), which is then used to drive the steam turbines. This system enhances fuel efficiency and minimizes waste.

KAPCO’s plant is unique in Pakistan, being capable of operating on three different fuels—Natural Gas, Low Sulphur Furnace Oil (LSFO), and High-Speed Diesel. It is also the only major plant in the country with the ability to self-start in the event of a nationwide blackout.

Before Mr. Khan’s appointment, the company’s leadership engaged in discussions with the National Task Force, including a meeting on December 17, 2024. The management confirmed its readiness to operate under the following terms and conditions:

1. Thermal Efficiency: Based on the actual heat rate test or 46.44% (RLNG) / 45.54% (LSFO) for Energy Block-1, and 42.57% (RLNG) / 42.05% (LSFO) for Energy Block-IIA (whichever is higher).
2. Heat Rate Test: To be conducted within 45 days.
3. Fixed O&M: Rs 2.35 billion per year, including switchyard.
4. Insurance Cost: Rs 0.7 billion per year for 495 MW, with a capping mechanism at 0.9% of EPC cost.
5. Variable O&M (VOM): Rs 0.8692/kWh for Energy Block-I and Rs 0.9992/kWh for Energy Block-IIA, based on NEPRA’s provisional tariff, indexed with a 5% annual increase.
6. Working Capital Cost: Rs 0.472 billion/year for 7 days of full-load LSFO inventory and the actual cost of the SBLC for RLNG supplies (maximum 1% SBLC charges).
7. Claw-back Mechanism: 50% savings on Fuel Cost Component (FCC), Variable O&M, and Fixed O&M.
8. Return on Equity (RoE): 25% fixed RoE based on NEPRA-approved RoE of Rs 0.3519/kWh for LSFO and Rs 0.3388/kWh for gas/RLNG, linked to availability, amounting to Rs 0.295 billion/year.
9. Dispatch Over 25% Availability: RoE for dispatch above 25% will be Rs 0.3519/kWh for LSFO and Rs 0.3388/kWh for gas/RLNG.
10. Pass-through Costs: Income Tax, WWF, and WPPF, prorated to income from 495 MW.
11. Startups: A total of 45 startups across all gas turbines, consisting of 15 hot starts, 15 warm starts, and 15 cold starts.
12. Part Load Adjustment (PLAC): The cost will be charged to the Power Purchaser.
13. Open Cycle Tariff: Will be allowed for open-cycle operation as per dispatch instructions, subject to an increase in the fuel component as determined by NEPRA.
14. Annual Indexation: 5% or national CPI, whichever is lower.
15. PPA Term: Three years from the effective date, with early termination possible for either party with a six-month notice period and no compensation obligations.
16. Late Payment Interest (LPI): To be calculated at KIBOR + 1%.

The sources also confirmed that KAPCO is willing to operate its switchyard facilities under the following conditions:

1. O&M of Switchyard: KAPCO will bear the O&M costs, recoverable through the generation tariff, without significant modifications.
2. Transformer Replacement: NTDC will provide up to two 160 MVA 220/132 kV transformers to replace the old ones. Installation and integration will be carried out by NTDC at its own expense.
3. Right to Evacuate Power: KAPCO will retain the right to evacuate power through its switchyard facilities after the PPA expires or the switchyard is transferred to NTDC.
4. Switchyard Transfer: At the end of the term, the switchyard will be transferred to NTDC at market value, determined by an independent valuer.

An addendum to the tariff petition will be submitted to NEPRA on the prescribed terms. The company has emphasized the urgency of signing the PPA and conducting capacity testing to enable the resumption of plant operations at the earliest opportunity.

Ends