RPPs to provide required electricity in six months

ISLAMABAD (APP) - A required electricity of 2250 MW will be generated from 14 rental power plants (RPPs) within six months which would end the energy crisis in the country.
According to official sources, such power plants will provide electricity at a quick speed compared to Independent Power Producers (IPPs) which will reduce power deficit on an emergency basis.
They said these rental projects are for five years and its costing responsibility rests with private sector investors. The contract life of these projects is between 3-5 years, after which the government has no obligation to purchase power from these units, they added.
Sources said it is entirely incorrect to suggest that rental power costs are substantially higher than those of IPPs. As compared with IPPs, RPPs power generation cost ranges between 12-13 cents per KWh, and IPPs power generation costs approximately 12 cent per KWh.
According to them, all RPPs have been selected by Pakistan Electric Power Company (PEPCO) and Pakistan Private Infrastructure Board (PPIB) through an International Competitive Bidding (ICB) process publicly and transparently.
They said rental projects are funded, normally on an 80:20 debt-equity ratio with banks demanding 20 percent cash up-front.
They said valuation of the plant and machinery is done by reputable, independent auditors appointed by the competent forum, and who report directly to the lending banks.
They said there is no pressure from the government on any bank in the public or private sector to fund any rental project. Lenders to rental power companies undertake their own due diligence and take decisions based on their own financial position.
Sources claimed that the impression that RPPs are set up with the government guarantees is incorrect.
They said it takes three to four years for an IPP plant to be set up and generate electricity whereas for a rental power plant six to eight months are required. Sources said there also is a give-or-pay guarantee which PEPCO monitors very carefully and if power is not produced by the rental plants, there are heavy penalties charged.
They said there are no financial guarantees whatsoever given either by PEPCO or by the government to cover any event of default on the part of rental sponsors.
This is a risk which is taken by lenders to rental sponsors against such collaterals as they deem fit. The government guarantee is provided to cover only the event of default of PEPCO or GENCO, the state-owned entities which buy rental power.
They said a short term solution to resolve the current energy crisis was crucially needed, adding, as the thermal rental power plants are the only solution available on short term and immediate basis, the government has opted for it and the cabinet has now given approval for 14 RPPs for 2250 MW of power generation. They said many countries of the world have successfully been implementing RPPs to meet their emergency power needs including China, Bangladesh, India, Sri Lanka, UAE, Egypt, USA, UK Puertorico, Guetamala, Mexico and West Indies.
They said presently, there is a demand-supply gap of about 3500 MW and the government is working to bridge the immediate gap besides building an additional capacity.
They said along with short-term projects there are long term projects in hydel and thermal sectors in pipeline and after five years the governments own projects would be completed.