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Why is NEPRA rethinking coal costs



The Nationwide Electrical Energy Regulatory Authority (NEPRA) determined to carry a re-hearing within the matter of revision in gas value adjustment mechanism dated September 23, 2016 for coal energy vegetation. The three main factors of the listening to relate to the weightages connected to the pricing of the imported coal, the basket of the coal used, and acquiring coal via tendering. 

“Coal, with its intricate nature, presents a extra convoluted problem in terms of the analysis and preservation of normal specs,” begins Faisal Zia Siddiqui, the Group Head at Sapphire Vitality. “That is significantly evident when juxtaposed with liquid and gaseous counterparts, whose commonplace export specs could be decided via rudimentary mechanisms resembling mixing,” Siddiqui continues. 

“Nearly all of Unbiased Energy Producers (IPPs) are procuring straight from a myriad of worldwide sources. Every supply has its personal distinctive specs that fluctuate based mostly on market dynamics. Consequently, devising a common method for shopper pass-on has perpetually been a frightening activity for regulators. This listening to seems to be a concerted effort to refine their amassed expertise,” Siddiqui provides. 

Now that we’ve coated how the story’s been informed within the headlines, let’s see what’s up.

The 2016 coal pricing mechanism  

The Gasoline Value Adjustment Mechanism is a method that calculates the month-to-month Gasoline Value Part (FCC) of the electrical energy tariff. This calculation is predicated on the precise costs, portions, and qualities of coal imported from varied areas, together with South Africa, Australia, and Indonesia.

This mechanism is a revision to the Upfront Coal Tariff choice made on June 26, 2014. The Upfront Coal Tariff is a hard and fast charge provided to coal-based energy initiatives to stimulate funding and reduce dependence on imported oil and fuel.

The FCC method varies for every area, contingent on the index used to find out the Freight on Board (FoB) value of coal. This value represents the price of coal on the port of origin previous to transportation. Indices are chosen based mostly on their transparency, liquidity, and relevance to the coal high quality and market. As an example, South African coal utilises the Argus/McCloskey’s Coal Value Index (API 4), while Indonesian coal employs the Indonesian Coal Index (ICI 3).

The FCC method additionally incorporates different elements resembling marine freight, insurance coverage, and extra prices. These are adjusted based mostly on precise prices supported by genuine documentary proof. It offers Unbiased Energy Producers (IPPs) with the pliability to acquire coal from any mixture of the aforementioned loading areas. The gas price part might be adjusted based mostly on precise weightage. 

tendering, NEPRA allowed IPPs to acquire native coal and Afghan coal from third events when world coal costs spiked in 2022. Nevertheless, as costs receded, varied corporations continued to depend on the spot market tenders to satisfy their demand wants. 

Why does NEPRA wish to change this? 

It expedites gas price adjustment filings for the assorted era corporations for every month of electrical energy they produce. 

“Coal is being procured from varied sources now so the benchmark must be versatile to include that,” explains Fahad Rauf, Head of Analysis at Ismail Iqbal Securities. 

Moreover, the present  pricing mechanism additionally assumes that each one coal procured from suppliers is purchased at commonplace charges. The NEPRA assembly has highlighted the way it will handle premiums, and reductions given to IPPs from suppliers. The present system fails to take into cognisance whether or not corporations can have relationships with spot market sellers in various capacities after tendering took off. 

The NEPRA listening to is to judge whether or not the tendering course of is an environment friendly one, or not given the present circumstances. 

What’s going to the brand new system seem like after the listening to? 

The system will stay tethered to a weighted method, because the sourcing oscillates in specs and portions for every energy plant. A shift in direction of a non-weighted method might be envisioned if a neighborhood coal market is established, one which sells a typical mix to all Unbiased Energy Producers (IPPs). Nevertheless, this seems to be a distant actuality. The Nationwide Electrical Energy Regulatory Authority (NEPRA) is unlikely to sanction any return to such an aggregator or intermediary, no matter the potential value effectivity it may introduce into the system.

One may query why we stick with such a labyrinthine system, slightly than adopting a mannequin the place all IPPs can independently import coal and generate electrical energy, akin to the strategy in India. NEPRA’s rationale is rooted in stability; they purpose to minimise surprises by way of month-to-month prices and be sure that the value of electrical energy doesn’t deviate drastically from the imply. 

Now, whether or not this method works is one other query solely. 

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NEPRA decides to get better Rs 3/unit from industrial shoppers of KE in two months



ISLAMABAD: Nationwide Electrical Energy Regulatory Authority (NEPRA) on Wednesday issued a revised choice and introduced the restoration of Rs 3 per unit from the commercial shoppers of Okay-Electrical in two months.

In line with NEPRA choice, the Authority, pursuant to the Judgment of the Supreme Court docket of Pakistan dated 19th January, 2023, issued its choice within the matter on 31st October, 2023. The choice was intimated to the Federal Authorities for notification in mild of Part 31 of NEPRA Act. Nevertheless, subsequently, the ministry of power (MoE) vide letter dated 10.11.2023, submitted that the Authority determined immediate case on the request of Okay-Electrical to regulate the tariff for the interval July 2019 to December 2019. In view thereof, the MoE requested that management/ implementation interval could also be clarified within the topic choice, mentioned NEPRA choice.

As per NEPRA choice, the Authority considers that the tariff adjustment interval includes of six months i.e. July 2019 to December 2019, and restoration of the identical has already been delayed. Subsequently, it will be acceptable to implement the identical in a interval of two (02) months. Accordingly, the implementation interval shall be two (02) months from the date of notification of the mentioned choice, mentioned NEPRA decison.

NEPRA has forwarded the moment choice to the Federal Authorities for notification in mild of Part 31 of NEPRA Act, added NEPRA choice.

Earlier, the federal authorities introduced the commercial aid package deal for July-December 2019 and the package deal was relevant for peak hours and off-peak hours. Nevertheless, the federal government ended the concession for off-peak hours on 22 January 2020.

After the federal government’s choice, Okay-Electrical began to gather the subsidy quantity, whereas the subsidy assortment was stopped when it was challenged within the courtroom, and now NEPRA has issued a revised choice  to get better Rs 3/unit from the commercial shoppers of KE in two months within the mild of the Supreme Court docket’s choice.

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Saudi Arabia extends $3bn lifeline to Pakistan for one more 12 months



Saudi Arabia has prolonged the time period of its $3 billion deposit with the State Financial institution of Pakistan (SBP) for one more 12 months, in a transfer that may assist Pakistan meet its exterior financing wants and help its financial restoration.

The SBP introduced on Wednesday that the Saudi Fund for Growth (SFD) had renewed the deposit settlement, which was on account of mature on December 5, 2023, for one more 12 months.

The deposit was first made in 2021 and rolled over in 2022 as an indication of the shut relationship between the 2 brotherly international locations.

The extension of the deposit time period is anticipated to ease the strain on Pakistan’s overseas trade reserves, which have been declining on account of debt repayments and decrease inflows from abroad traders.

Pakistan’s total overseas trade reserves stood at $12.302 billion as of November 17, of which $7.180 billion had been held by the SBP and $5.122 billion by the business banks8.

The nation faces a difficult exterior financing scenario, because it has to repay about $5 billion in exterior debt within the remaining months of the present fiscal 12 months.

The $3 billion rollover can also be seen as a constructive growth for the continued IMF programme, which requires Pakistan to safe financing commitments from its lenders and pleasant international locations.

The IMF’s government board is prone to approve the second mortgage tranche of $700 million for Pakistan in early December, after the completion of the primary evaluation of the $3 billion stand-by association.

Pakistan can also be anticipating to obtain about $1.2 billion in financing from the World Financial institution, Asian Growth Financial institution, and Asian Infrastructure Funding Financial institution earlier than the top of the 12 months. The federal government can also be hopeful of getting extra inflows from different pleasant nations to help the nation’s economic system.

Pakistan’s economic system has been combating low progress, excessive inflation, and forex depreciation in recent times. The nation was on the verge of default final 12 months, however averted it with the assistance of the IMF bailout and the help from Saudi Arabia and different allies. Nevertheless, the IMF programme has additionally imposed strict circumstances on Pakistan, resembling growing gasoline, power, and petrol costs, which have added to the woes of the frequent folks.


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Pakistan secures multi-billion greenback funding from Kuwait amid financial woes



Pakistan and Kuwait signed quite a few memorandums of understanding (MoUs) because the struggling South Asian nation seeks multi-billion greenback funding from the Gulf state.

The signing got here as caretaker Prime Minister Anwaar-ul-Haq Kakar visited the Gulf state on a two-day go to, the place leaders from each side agreed to bolster bilateral and financial ties, days after Islamabad signed a number of MoUs with the UAE to draw funding price billions.

A press release from the PM’s Workplace talked about that the interim premier and Kuwait’s First Deputy Prime Minister and Minister for Inside Sheikh Talal Al-Khaled Al-Ahmad Al Sabah underlined the significance of historic brotherly ties between the 2 international locations.

Throughout a gathering, they reaffirmed the will to strengthen the fraternal ties by reworking them right into a mutually rewarding financial partnership. Chief of Military Workers Basic Asim Munir was additionally current in the course of the assembly.

The leaders additionally witnessed the signing of seven agreements concluded to draw multi-billion {dollars} in funding from Kuwait in varied sectors of Pakistan — together with meals safety, agriculture, hydel energy, water provides, the institution of mining fund to assist mineral business, know-how zones growth, and mangrove preservation.

As well as, three MoUs within the fields of tradition and artwork, surroundings, and sustainable growth have been additionally signed. The leaders expressed nice satisfaction on the trajectory of relations, agreed to stay in shut contact, and take swift steps in additional strengthening and deepening Pakistan-Kuwait relations.

The prime minister termed these agreements with Kuwait one other milestone within the achievements that the Particular Funding Facilitation Council (SIFC) platform was bringing to the nation.

Pakistan’s financial system is in dire straits with its overseas reserves depleting rapidly amid much less inflows from abroad buyers.  Based on a report by BMI Analysis, a Fitch Options firm, the Pakistani rupee (PKR) is anticipated to proceed its downward spiral and attain a historic low of 350 per greenback by the tip of 2024.

The nation was getting ready to default final yr, however it was averted after the Worldwide Financial Fund (IMF) authorised a short-term bailout with strict circumstances — pushing the inflation up as Pakistan underwent a number of structural reforms, which noticed a rise in gasoline, power, and petrol costs.

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