Payment demanded to buy coal: CPHGC warns NEPRA of closure of power complex

China Power Hub Generation Company (Pvt) Ltd (CPHGC) has cautioned the government that it would shut down its complex after middle of next month if substantial payment is not made to purchase coal as inventory is now depleting.

This company has conveyed this message to National Electric Power Regulatory Authority (Nepra) and other concerned authorities. The CPHGC is a 1,320 MW CPEC coal-fired power project which is committed to delivering on the promise of propelling growth through energy.

The Chief Executive Officer (CEO), CPHGC, in his letter has stated that CPEC projects have always supported the government of Pakistan by providing cost-effective energy solutions to the country despite current political instability in the country and skyrocketing prices of the fuel in the international markets. But current financial outlook is tearing apart this vision of GoP and have raised an alarming situation for all CPEC power projects.

The company referred to its letter of March 28, 2022, wherein it had requested CPPA-G to release immediately Rs 31 billion to fulfil its obligations relating to debt repayment and coal procurement.

The company further highlighted to CPPA-G that due to the higher unpaid receivable balance the company has stuck up cash and a suspension of 15 days in the coal procurement has been made which will be subject to further increase, unless substantial funds are released. Moreover, the Company will not be able to procure further coal due to the huge outstanding receivables. Subsequent to the letter no significant amount of recoveries was made to the company.

During the period beginning from March 29, 2022 the Company had recovered Rs 4.685 billion by April 18, 2022 while meeting its debt repayment obligation amounting to $ 66.3 million.

The CEO CPHGC, further stated that owing to suspension of the coal procurement and the limitations of the company to procure coal during monsoon period, currently the coal stock of the company has depleted to an extent which does not allow it to operate the plant at full capacity during monsoon period without breaching the terms as stipulated under the upfront tariff. Nevertheless, the outstanding receivable position has still not improved to ensure that the company can procure coal in future.

According to the company, in its several correspondences and meetings with the relevant officials of Ministry of Energy and CPPA-G, it raised the concern of liquidity and also shared the detailed fuel procurement plan and subsequent fund requirements.

However, no significant improvement has been witnessed in this regard and owing to slower trend of tariff recoveries, the company is unable to meet its operational requirements for coal procurement and this situation is worsening with each passing day.

The CPHGC claims that its plant is one of its own kind as having an operational dedicated Jetty facility for offloading of coal at the site, which enables it to directly import coal instead of having to wait for offloading at any other Pakistani port. But in monsoon period, import through Jetty is stopped due to high tides and Nepra has allowed import of coal maximum up to 600,000 tons (150,000 tons / month) through other Pakistani ports. The restriction is in place to ensure that the coal cost is kept to a minimum to ensure the energy solutions remain viable for the general public.

The power company has also claimed that it approached NPCC multiple times to highlight the challenges it has been facing in management of coal inventory in monsoon season (April-September 2022) through various correspondences.

In this regard, the CPHGC requested NPCC to allow the company to shift scheduled outages of Complex in monsoon months so that despite the limited tariff recovery from CPPA-G and under the unprecedented global fuel price challenges (Russia and Ukraine war etc.) CPHGC can manage stable & reliable dispatch during monsoon period.

In this regard the company shared its open willingness to reschedule these outages in any month from April to September, 2022. However, NPCC has not entertained the Company’s request and mentioned that keeping in view the annual power generation plan, they cannot allow schedule outages from April to August 2022.

Consequently, on the basis of current coal stock inventory at CPHGC which is 344,000 tons (as of April 14, 2022) and keeping in view the daily average consumption of 11,000 tons at full plant load, CPHGC can only operate both units with existing inventory until mid of May, 2022. Afterwards company’s ability to generate electricity for the national grid will be substantially affected and complex may have to shut down.

In view of current situation and the constraints, CPHGC has requested the government to take immediate measures to ensure that guarantees mutually benefit all. “We request CPPA-G to ensure substantial improvement in the recoveries immediately allowing the company to initiate its coal procurement and further request NPCC for the rescheduling of schedule outages to enable the company to reduce its inventory consumption at least during the monsoon period,” said the CEO.

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