By: Shajar Capital Pakistan Private Limited
NEPRA has recently announced its decision for the tariff petition filed by Pakgen Power Limited (PKGP) and Lalpir Power (LPL) concerning conversion of their existing RFO based plant to coal. The approved project cost (EPC) of US$215.485mn is considerably reduced from the requisition for US$288.35mn (down 34%) whereas the efficiency benchmark has been increased to 36.6% as opposed to demand of 35.6% alongside a levelized tariff of 7.16c/kWh contrary to 7.95c/kWh asked for.
As per the Company, functional details are awaited as a technical evaluation is in process to determine if the project installation can be conducted in the given cost and specifications.
If the project turns out to be still feasible, new security and financial regulations will come to the forefront which will be followed by a generation license, grid study and environmental guidelines for the plant to operate in. This will conclude by June 2016. Post this and plant construction (24 months permitted), the project will be online by end of 2018/19.
Our preliminary workings suggest a net positive EPS impact of PkR1.39/sh and PkR0.84/sh to be witnessed in earnings of PKGP and LPL respectively in CY20.