Central Power Purchasing Agency Guaranteed (CPPA-G) has voiced some grave concerns regarding M/s Hubco’s proposed plan to convert its power plant from Residual Fuel Oil (RFO) to coal. Hubco had submitted a plan to the government to convert furnace oil-fired plant into a coal-fired power plant prior to expiry of Power Purchase Agreement (PPA in 2027).
PPA for Hubco’s project was signed in March 1997 between Wapda and Hubco for 30 years which is going to expire in March 2027 following which any further extension in the existing agreement would be on new terms and conditions. It was instructed by the erstwhile Ministry of Water and Power, in a letter of June 2016 that no further financial commitments would be justified for purchasing of power on imported fuels. Hence, proposal of Hubco to utilize pulverized coal boiler with imported sub-bituminous coal cannot be entertained.
Another major concern is that the current demand supply balance includes Hubco’s 1200 MW as committed available capacity until 2027 and it is feared that during the period of conversion, its unavailability can cause shortage in the system. CPPA-G further commented that Hubco power plant was established under Power Policy 1994 and its PPA does not support the concept of conversion proposal.
During the proposed conversion from RFO- fired boiler to coal fired one, the other equipment will not require changing. But the question is that would it be technically viable or useful to extend PPA for another 25 years after retrofitting boiler with the remaining old equipment keeping in mind that existing steam turbine along with other plant equipment was meant for a 30 year term, out of which more than 20 years have already passed?
The project has paid the entire debt component during the operation cycle of more than 20 years which has significantly resulted in reduction of Capacity Purchase Price (CPP) but the acceptance of such a proposal would imply that power purchaser will be bound to pay again full capacity payment as per new agreement. On the other hand the existing project, after expiry of its PPA, will have the opportunity to trade under the competitive wholesale market framework.
