Ministerial Group Advises Against Privatisation of LNG Power Plants

Web DeskFebruary 4, 20243434 min
Ministerial Group Advises Against Privatisation of LNG Power Plants

The Ministerial Group, part of the Special Investment Facilitation Council (SIFC), has raised concerns over the government’s plan to privatise two LNG power plants, citing uncertainties in the current investment climate. The power plants, established during the previous government’s tenure with an LNG contract signed with Qatar, have come under scrutiny for their potential privatisation.

The apex committee of the SIFC had directed the formation of the Ministerial Group to evaluate the possibility of privatising the Haveli Bahadur Shah and Balloki RLNG Power Plants. After thorough deliberations, the group advised against the privatisation of these LNG power plants at the present time, considering the overall investment climate.

Also Read: LNG agreement between Pakistan and Azerbaijan

The Ministerial Group highlighted potential future tariff gains amounting to Rs130.8 billion and emphasized a payout to clean books of Rs264 billion, with RLNG power plants already generating a profit of Rs153 billion. The decision comes as Qatar expresses interest in acquiring these LNG-based power plants.

The potential privatisation has been a subject of discussion since 2021 when the cabinet committee on energy exempted LNG-based power plants from a 66% guaranteed off-take of LNG. This move raised concerns about the financial strain on gas utility Sui Northern Gas Pipelines Limited (SNGPL) and the power plants. The government also contemplated exempting the LNG power plants from the merit order.

The power sector’s role in the RLNG supply chain is crucial, and any disruptions can impact the economic dispatch of power, leading to challenges in the gas transmission system. Challenges include lower RLNG supply causing operational constraints and system stability issues. The decision to exempt RLNG power plants from guaranteed offtake was driven by private parties’ interests, particularly those eyeing the acquisition of these LNG power plants.

Despite potential gains, experts caution that the privatisation process is complex, considering the existing circular debt in the power sector. Payment issues for electricity supplies and circular debt in the LNG sector contribute to the challenges. Recommendations include addressing power distribution companies’ issues to effectively manage the circular debt in the power sector.

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