KARACHI: The two international firms in fray for constructing a 1,000MW power plant, which will use imported coal as fuel, have completed feasibility studies, an official told The News on Saturday.

AES Corporation of US and Japanese Mitsui Group were short-listed in December 2006 to prepare two separate feasibility reports for Pakistan’s first such power plant.

“Negotiations for power tariff will get underway in a couple of weeks,” said the official, who works for Private Power Infrastructure Board (PPIB). “I cannot specify how much that is going to be, but it will be around NEPRA’s tariff for indigenous coal-fired power plants.”

Pakistan is facing an electricity shortfall of 3000MW per day, and spends billions of rupees annually to import fuel oil to run its thermal power plants.

The decision to generate power using imported coal was based on assumptions that not only will it help in meeting demand, the cost of coal will always be lower than oil’s.

National Electric Power Regulatory Authority (NEPRA) has given an upfront tariff of US7.8 cents per kilowatt hour (kWh) for Thar coal-fired power plants. However, this tariff differs greatly from what the investors will want for a power plant based on imported coal.

Landed cost of imported coal has surged to $130 per tonne from $60 a year ago. Any tariff based on this coal will reflect the price fluctuation, unlike the upfront tariff offered by NEPRA.

NEPRA’s tariff has been calculated on the basis of a report prepared by a German firm RWE in 2004. RWE has recommended a leveled tariff of 7.1 cents per kWh for 40 years.

Abdul Basit Mehta, a local representative of RWE, said the tariff was calculated after taking into consideration the costs associated with mining and generation. There is no variable component in the tariff, he added.

NEPRA’s tariff seems lucrative from RWE’s point of view, but Hassan Associate, which has proposed the mining of Thar coal and using it for a 1000MW power plant, sees it unfeasible.

“Cost of machinery and equipment has increased manifolds in the last few years,” a company official said. “Anything below 10.5 cents will be unacceptable.”

The company had initially demanded 11.1 cents, but had to revise down the tariff after the government’s refusal.

It is prudent to recall again, that back in 2005 a Chinese company had agreed to undertake the capital-intensive project at 5.7 cents. That tariff was rejected and the company left.

Pakistan is fighting to catch the elusive dream of utilising cheap source of energy since 1992, which was the year when it was discovered that Thar District is sitting over 175 billion tonnes of coal reserves.