ISLAMABAD (PEN): Sahiwal Coal-fired Power Plant has been consistently operating within the legal framework stipulated by the National Electric Power Regulatory Authority (NEPRA) and the Ministry of Energy, with an unwavering dedication to safeguarding the interests of Pakistani electricity consumers, said a statement on Monday.
In response to a news published in local media raising questions about the bidding process for coal procurement for the powerhouse, the Sahiwal Coal-fired Power Plant vehemently refuted any insinuation that it deviated from the stringent adherence to local laws and regulations in Pakistan.
“Our contributions to fostering CPEC stand as a testament to our commitment to the enduring friendship between our nations,” said the powerhouse, adding that the coal procurement process entails a completely open and transparent bidding process, with the lowest bid being selected.
The power plant, since 2022, amidst the challenges posed by the shortage of foreign exchange reserves of the State Bank of Pakistan, as an imported coal-fired power plant, has navigated numerous obstacles and switched to the procurement of rupee-paid spot market coal and long-term contract coal under the requirements of the Ministry of Energy.
The following paragraphs will rationally explain the coal procurement procedure and requirements.
The rationality of coal procurement prices
On comparison of the South African imported coal price index and the spot market coal winning prices for the same period, the spot market coal prices (Rs. 70,000/ton – Rs. 74,000/ton) procured by Sahiwal Power Plant for the period June to December 2022 were much lower than the South African imported coal prices (Rs. 79,291/ton – Rs. 81,350/ton) for the same period, which was the ceiling price later stipulated by NEPRA.
Based on the above price comparison, it is evident that even before the issuance of spot market coal procurement guidelines by NEPRA, the Company’s spot market coal price was much lower than the market price of imported coal and also helped Pakistan save a substantial amount of foreign exchange expenditure. The main reason for procuring spot market coal at a lower price was the strict adherence to the open bidding process.
It should be emphasized that the reduction in coal procurement prices in 2023 was not due to NEPRA issuing guidelines, but rather a result of significant declines in international energy prices. In addition, the types and qualities of coal procured by coal-fired power companies significantly differ from those purchased by the cement and textile industries; therefore, directly simplistically comparing unit prices is not scientifically valid.
The power plant said the bidding process employs the policy of “lowest price wins the bid” raising a question “why suppliers who claimed to be able to provide coal at 45,000 Rs/ton did not participate in the bidding during the June to December 2022 period when the average international coal prices were consistently $274 per ton (82,000 Rs/ton)?”
The bidding process is open and transparent
The correspondent had seen sufficient evidence which demonstrated Sahiwal Power Plant’s strict adherence to NEPRA regulations for procurement of rupee-paid spot market coal and long-term contract coal. Suppliers are selected through an open tender process, ensuring full compliance with legal requirements.
The bidding procedures by the Sahiwal Coal-fired Power Plant are conducted openly and transparently, with measures such as advanced publication of bidding notices in local newspapers, sealed bids, and video-recorded bid opening processes supervised by all bidding suppliers onsite, thereby eliminating any possibility of manipulation by interested parties.
It is imperative to highlight that also the Central Power Purchasing Agency (CPPA-G) has provided a No Objection Certificate to the final draft contract under the Power Purchase Agreement.
It is crucial to reiterate that Sahiwal Power Plant’s procurement procedures consistently adhere to NEPRA guidelines and are endorsed by CPPA-G, the purchaser of electricity. By procuring coal at the lowest bidding price, it protects the interests of Pakistani power consumers and minimize potential capacity payment deductions due to coal shortage downtime.
About the long-term coal tendering process
On October 30, 2023, Sahiwal Coal-fired Power Plant received from the National Transmission & Dispatch Company (NTDC) requesting the company maintain coal inventory sufficient for 90 days of full complex operation as per PPA5.14 of Power Purchase Agreement to meet the grid demand during the winter season.
It should be noted that even without NTDC requirements, Sahiwal Power Plant had to procure coal to avoid unreasonable capacity payment deduction due to low coal inventory.
Unfortunately, following the issuance of the NEPRA’s Guidelines on spot coal, the weak performance of spot coal supplies has significantly affected the continuity of the company’s coal supply. To secure coal supply, the company initiated a public tender process for long-term coal suppliers under the prevailing tariff policy, and on Nov. 29, 2023, one supplier won the bid, and the winner started ordering the required coal subsequently as per the tender document.
The Sahiwal Coal-fired Power Plant revealed that some disgruntled unsuccessful suppliers who failed to secure bids have been spreading rumors and baseless allegations to disrupt the market, and their grievances would be addressed by legal means.
The power plant added that if any media person has some questions about any issue he can approach the company for clarification and answers rather than publishing one-sided version.
To dispel the persistent doubts, misconceptions, and vilification that someone has repeatedly expressed over the years regarding imported coal-fired power plants under CPEC, the company has repeatedly requested the relevant Pakistani authorities over the years to formally take over the coal business.
