Power privatization stalls as IPP talks drag
KARACHI: Two of the parties that remained interested in the privatization of two RLNG-based power plants have signaled their refusal to place any equity bids for the projects at the moment. They have told the government that they are watching the ongoing tariff renegotiations with the independent power producers (IPPs) that were launched shortly after the release of the inquiry report on the IPPs. At issue are two power plants — Haveli Bahadur Shah and Balloki, both in Punjab — owned by the federal government. Both plants were built with government money with the intention to privatize them soon after they began commercial operations, which happened in the middle of 2018. The privatization programme has been troubled for a long time now. The government appointed Credit Suisse as its sell side adviser in March 2019, and its first attempt to invite expressions of interest (EOIs) in November 2019 met with a tepid response.
The deadline was extended, and finally EOIs from 12 parties were received in January 2020. But with the onset of uncertainties from Covid-19, that number dwindled to three. The Qatar Investment Authority, with Nebras Power, Mitsui & Marubeni from Japan as partners, leads one of these consortia. The other is led by Edra Power Holdings, a Malaysian power company owned by the China General Nuclear Power Corporation, in partnership with the Thailand-based Global Power Synergy Corporation. The two projects on the privatization list are not, strictly speaking, part of those 13 whose tariffs the government is seeking to renegotiate. But their tariff structure is substantially similar to that of the 13 under renegotiation, with fixed returns of 16 per cent on equity. Renegotiating the terms with the others and leaving these ones untouched will create two tiers of private power producers, in terms of the returns enjoyed by them, and possibly bolster the legal case for the 13 IPPs to say they are being unfairly targeted.