Thermal IPPs may be converted to LNG, diesel or coal

Karachi: The Government has decided to convert existing public and private thermal power plants to cheaper fuels in order to overcome the rising furnace oil prices and depletion of gas reserves.

According to Alfalah Securities Limited, the alternative fuel feasible for combined cycle gas-based power plants would be LNG/diesel/naphtha which can be used with very less or without any modification while, steam turbine thermal units would benefit the most on conversion to coal which is estimated to save USD 8.04 bn on annual basis. However, the conversion of these IPPs on cheaper fuels would incur new capital costs for the plant, outage time to dismantle old boilers, assemble new ones, additional auxiliary consumption, and availability of coal and environment degradation.

IPPs would be given a year for conversion during which they would be provided half of their escalable tariff component (covering their returns) along with non-escalable tariff component (covering their debt servicing), savings achieved from switching of fuels to be shared between the IPP and the power purchaser, the power purchaser would be allowed to legalize the agreement and seek extensions in the agreement without any government regulation.

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