A government delay in granting final approval to a power station to be built by the local Fauji Electric Power Company (Fepco) is raising the prospect of more private power proposals being turned down. The 1993-98 economic development plan estimated requirements at 3,500 MW.
Projects with capacity totalling 7,020 MW were granted letters of support, with the government calculating a 40 per cent expected success rate. Fepco believes that the delay in receiving final approval for its project could be because more schemes than the government expected are now coming to fruition.
A contract award for the main engineering, procurement and construction contract for the 340-370-MW oil-fired plant was said to be imminent in March. Fepco says that the award cannot be made before the scheme, to be built in Baluchistan, gets the official go-ahead from the government.
Industry sources say that the delay could be linked to doubt on the government’s part about Fepco’s ability to meet a July deadline for financial close. The deadline was incorporated into power purchase, fuel supply and implementation agreements. The project fell behind schedule when the original turnkey contractor pulled out, the sources say.
Fepco remains confident that it can reach financial close before the deadline, or that it will be granted an extension. The total cost of the project is estimated at $325 million, Fepco says. The structure of the financing package is likely to include equity of just over $80 million, of which Fepco will take 45 per cent. It is hoped that the operation and maintenance contractor will take a 25 per cent stake, and that financing institutions will account for the remainder.
Bids for the turnkey construction contract are to include export credits, and the International Finance Corporation (IFC) is to be formally approached for a loan from its own account and a syndicated loan. The IFC says that, pending a final proposal from Fepco, it is in principle willing to offer finance for the scheme. Fepco, however, needs approval from the government before completing the finance details (MEED 31:5:96).