National Electric Power Regulatory Authority Islamic Republic of Pakistan

Transcription

1 National Electric Power Regulatory Authority Islamic Republic of Pakistan 6= *ffewz4 Registrar NEPRA Tower, Attaturk Avenue (East), G-511, Islamabad Ph: , Fax: Web: No. NEPRA/TRF-342/CPI IGCL-2016/ July 28, 2017 Subject: Decision of the Authority in the matter of Application by China Power Flub Generation Company (Private) Limited (CPHGCL) for Approval of Cost of Dedicated Jetty alongwith Coal Transshipment Services [Case No. NEPRA/TRF-342/CPHGCL-2016] Dear Sir, Please find enclosed herewith the subject Decision of the Authority (18 pages) in Case No. NEPRA/TRF-342/CPEIGCL The Decision is being intimated to the Federal Government for the purpose of notification in the official gazette pursuant to Section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997). 3. Order of the Authority's Decision shall be notified in the official Gazette. Enclosure: As above Secretary Ministry of Water & Power A' Block. Pak Secretariat Islamabad CC: 1. Secreta ry, Cabinet Division, Cabinet Secretariat, Islamabad. 2. Secreta ry, Ministry of Finance, `Q' Block, Pak Secretariat, Islamabad. 0-1 ( Syed Safeer Hussain )

2 DECISION OF THE AUTHORITY IN THE MATTER APPLICATION BY CHINA POWER HUB GENERATION COMPANY LIMITED FOR APPROVAL OF COST OF DEDICATED JETTY ALONG-WITH COAL TRANSHIPMENT SERVICES 1.0 BACKGROUND 1.1 China Power Hub Generation Company Limited (hereinafter "the Applicant" or CPHGCL) is setting up a 2 x 660 MW imported coal-fired power plant at Hub, Baluchistan. For this purpose, CPHGCL was granted coal upfront tariff vide Authority's Decision dated February 12, The Authority in the upfront coal tariff dated 26th June 2014 admitted that for a large scale coastal imported coal project, the construction of jetty would be indispensable. The Authority included US$ 9.46/ton in the fuel price on account of common jetty facility. It is also provided in Para 49 of the referred decision that in case the project company constructs a dedicated jetty, the jetty cost including its O&M cost per ton will be subject to adjustment on the basis of verifiable documentary evidence. The Authority, however, directed that before requesting an adjustment in jetty cost, the petitioner will have to thoroughly investigate into the possibilities of changing the design of jetty in a way that least cost and reliable coal offloading facility is arrived through transparent competitive process while taking on board the PPIB, Pakistan Navy, Pakistan Coast Guard, Ministry of Ports and Shipping and clearance from all the relevant departments. In the review decision dated 21st November 2014, the Authority further provided that the cost of standalone jetty shall be determined and allowed by the Authority on case to case basis subject to provision of verifiable documents to the satisfaction of the Authority. It is also provided that the cost of dedicated jetty will be determined and fixed and variable cost will be reflected under relevant tariff components i.e. capacity and energy charges respectively. 1.3 While approving the upfront tariff in favour of CPHGCL, the Authority vide decision dated February 12, 2017, decided that since the project is based on dedicated jetty, the cost of common jetty facility shall be excluded from the price of coal and the cost of dedicated jetty will be added to the respective components of tariff. 2.0 FILING OF APPLICATION FOR ADJUSTMENT 2.1 CPHGCL vide letter No. CPHC-NEPRA/KK-ZY/ , dated June 29, 2016, submitted an application for adjustment of coal upfront tariff for optimal jetty design including, as an integral part, a dedicated Coal Transhipment Services (CTS) for its 2 x

3 660 MW imported coal fired power project. CPHGCL also provided signed EPC contract for coal offloading barge jetty. The salient features of the application are as under: The EPC price of the coal offloading jetty is US$ million. The estimated non-epc cost is US$ million. Custom duties & cess, sinosure fee, interest during construction, financing fees and charges will be increased to take into consideration the additional costs of jetty. Annual Fixed O&M cost of US$ 4.16 million and variable O&M cost US$ 0.19/ton. Estimated annual fixed CTS cost of US$ 20.7 million, variable CTS O&M cost of US$ 0.75/ton and CTS bunker cost of US$ 1.85/ton Levelized tariff of US Cents /kWh has been calculated for the combined impact of jetty project cost of US$ million and CTS cost. Jetty project cost assumes US$ million on account of cost of custom duties & cess, sinosure fee, interest during construction and financing fees and charges. Due to the weather constraints of operating the barge jetty during the monsoon months, a maximum shortfall quantity of 600,000 tons shall be handled at alternative port (PKT/PQA). Port handling and inland transport charges of the shortfall quantity during the monsoon months shall be considered as pass-through. 2.2 The Applicant requested the Authority to approve the following costs and components relating to jetty and associated CTS: i. Capital expenditure comprising of the EPC and non-epc costs which will be added ii. iii. 3.0 HEARING to the project cost already allowed to the power project. Additional fixed O&M and the additional variable O&M together (including the fixed and variable CTS costs) with the applicable indexations. The assumptions mentioned under Para 7.4 of the Application. 3.1 In order to proceed with the application, the Authority decided to give an opportunity of hearing to CPHGCL on 8th September 2016 in Marriot Hotel Karachi. Notices were issued to all the stakeholders who were considered important in the matter. 2

4 3.2 The following issues were framed for the hearing: i. Whether you have thoroughly investigated into the possibilities of changing the design of jetty in a way that least cost and reliable coal offloading facility is achieved? ii. Whether the proposed EPC price is arrived through transparent and competitive process? iii. Whether consent/approval/noc from relevant department has been taken while finalizing jetty cost? 3.3 The hearing was participated by the representatives from CPHGCL, PPIB, Logmarin Advisors (Italy), Royal Haskoning DHV, K-Electric, Engro Polymer& Chemicals, Lucky Electric Power and RIAA Law. However, none of the stakeholders submitted any comments in writing. 4.0 WHETHER YOU HAVE THOROUGHLY INVESTIGATED INTO THE POSSIBILITIES OF CHANGING THE DESIGN OF JETTY IN A WAY THAT LEAST COST AND RELIABLE COAL OFFLOADING FACILITY IS ACHIEVED? 4.1 According to CPHGCL, before moving to a dedicated Jetty solution, it evaluated in detail the existing infrastructure available in terms of the capacity for handling coal at Karachi Port, Port Qasim and the facilities proposed at Pakistan International Bulk Terminal and the existing road network connecting these port facilities. For this purpose, CPHGCL hired AA Associates and Engineering Consultant International Private Limited to carry out a logistic study. The study concluded that MTPA of coal can be transported for the foreseeable future. However, significant investment will be required in the current infrastructure keeping in consideration economic growth and increase in traffic congestion. 4.2 Subsequent to analysing existing infrastructure, CPHGCL started detailed deliberations with stakeholders and the Authority, and presented three options for dedicated solutions; (1) Mother Vessel Jetty,(2) Barge Jetty with Offshore Lighter age Solution (OLS), (3) Barge Jetty with OLS Outsourcing. During these deliberations, a fourth option of offloading of coal at PIBT and transportation of coal to Site via Barging came into discussion. 4.3 The Applicant submitted that while the Mother Vessel Jetty option is the most expensive one, it offers least challenges in terms of operations. In this case, a vessel shall berth along-side a fixed structure. However, due to the presence of hard rock base in the coastal region, it's construction may not be suitable. In order to avoid exorbitant 3

5 dredging costs and achieve the desired 14 meter sea depth, Mother Vessel jetty's length needs to be extended in to the sea by more than 4.8 km. A conveyor system has to be designed to withstand sea conditions during Monsoon. This structure is likely to become inoperable during Monsoon months, but yet offers the longest operation period during the year (300 days) and may have the ability to handle up to 100,000 DWT vessel. 4.4 According to CPHGCL, Barge Jetty with OLS and Barge Jetty with OLS outsourcing options are prevalent on ports and terminals servicing projects in remote locations mostly in Indonesia, India and North East Australia. Shorter and more localized Jetty handle barges which move goods from the unloading system. Despite being more complex compared to the Mother Vessel Jetty solution, it offers scalability and reduced capital costs. According to the Applicant, the option of Barge Jetty solution with OLS outsourcing is of particular interest primarily because it requires lower capital cost and better operational risk mitigations. 4.5 A cost breakup of the four aforementioned dedicated Jetty solutions, as provided in the Application is reproduced below: Amounts in USD/MT Jetty Cost Fixed* Jetty Cost Variable Port Handling and Other Costs Road Transport Cost OLS Contractor Cost Barging Cost from PIBT Levelized Coal Handling Charges Levelized Tariff (Cents/ kwh) Option 1 (Mother Vessel Jetty) Option (Barge Jetty OLS Jettyunloading at Site (2.7MN MTPA) with KPTroad (0.9MN MTPA) Option (Barge Jetty Outsourced jettyunloading at Site (3.0MN MTPA) with OLS) KPT- Road (0.6MN MTPA) Option 4 (Barge Jetty with PIBT Barging) Jetty- PIBT- Unloading road at PIBT (0.6MN (3.0MN MTPA) Regarding the option of Barging with PIBT, the Applicant was of the opinion that barging for nautical miles to the proposed Site shall be complicated and may require significant investment in barges and tug boats. Further, the Applicant submitted that barge unloading marine structure utilized in the barge with PIBT option shall be the same as that in the Barge Jetty solution with OLS outsourcing. However, preceding option may have higher operational cost due to PIBT terminal handling charges (indicated as US$ 9/MT) and more diesel consumption by barges. 4

6 4.7 According to the Application, PIBT would not invest and manage a barge fleet, which translates into higher capital cost requirements compared to the options of Barge Jetty with OLS and Barge Jetty with OLS outsourcing. Given the size of the project, a minimum of 8 barges will be required to transport coal. Further, according to the Applicant, PIBT is non-committal about the potential vessel unloading & barge loading charges. This, according to the Application requires design modification in the loading cranes. 4.8 Given the above, the Applicant has concluded that the capital costs associated with this option are significant, particularly when the Applicant is required to invest and maintain a fleet of barges. Also, other challenges including longer distance, channel traffic at PQA, port charges and uncertainty regarding barge loading made it evident to the Applicant that this option is more complex and requires more capital and operation costs. 4.9 After aforementioned evaluation, CPHGCL concluded that a Barge Jetty is more viable compared to a mother vessel jetty. Therefore, the bidding process for the selection of the EPC Contractor for the construction of Jetty was based on a Barge Jetty. 5.0 WHETHER THE PROPOSED EPC PRICE IS ARRIVED THROUGH TRANSPARENT AND COMPETITIVE PROCESS? 5.1 In accordance with the provision of Upfront Coal Tariff, CPHGCL carried out the bidding process for the selection of the EPC Contractor for the construction of the Jetty of the said project. For this purpose, CPHGCL hired the following consultants: Consultant China Harbor Engineering Company (CHEC) Guangzhou Electric Design Institute (GEDI) China Second Harbor AA Associates and Engineering Consultant International Private Limited (ECIL) Techno Consult International (TCI) Hagler Baily Royal HaskoningDHV Logmarin Advisors Scope of Work Performed Pre-feasibility Study and marine topography for the proposed site Power Plant Feasibility with dedicated Jetty Engaged as a sub-contractor with GEDI to carry out the feasibility study for Coal unloading jetty Hired for the evaluation of the existing port facilities, road conditions, trucking industry capacity, and etc for the preparation of Logistic Study Hired as an expert for data gathering specially marine data Hired for environmental and social impact assessment for the project Hired as the Owner's Engineer for the design, feasibility and in bidding process for assisting in selection of EPC Contract for jetty Consultant for Coal Transshipment Services 4-A 5

7 5.2 The detail of the bidding process is as under: i) An advertisement was published on December 8, 2015, in the daily DAWN and Jang newspapers. ii) iii) iv) In response to the advertisement, fourteen (14) companies from United Kingdom, China, Turkey, UAE and Pakistan expressed their interest in the project. The RFP was made available for seven days from the date of publication of the advertisement till December 14, The RFP was issued to 7 companies for a prescribed fee. v) The deadline for submission of RFP was set as January 18, The following three companies submitted detailed technical and financial bids: a) NWEPDI + NDRI ("NDRI"); b) China Harbour Engineering Company Ltd. ("CHEC"); and c) China Machinery Engineering Corporation ("CMEC") 5.3 The details of bid evaluation are as under: i) Bids were opened on February 1, 2016 in Karachi and were evaluated in two stages by Royal HaskoningDHV (Owner's Engineer). The first stage was named High Level Review, while the second stage was called Detailed Evaluation Report. ii) Royal HaskoningDHV published a High Level Tender Evaluation report on April 13, 2016, wherein each bid was evaluated on the basis of General Review and Technical Review. Royal HaskoningDHV awarded the following scores to the bidders: iii) iv) Maximum Actual Score Section Score CHEC NDRI CMEC Available General Information Financial Personnel Project Experience Initial Construction Strategy Review Total The High Level Tender Evaluation report recommended NDRI and CHEC for the next stage of evaluation. According to the Detailed Evaluation report published by Royal HaskoningDHV on April 22, 2016, face to face meetings were held with the recommeired bidders in order qat 6

8 to finalize/ improve on the design of the coal unloading jetty. After face to face meetings, Royal HaskoningDHV produced Design Criteria document and Materials and Workmanship Specifications for key maritime civil structures and quay equipment for the Jetty EPC element to further support the original Jetty EPC bidders RFP document. The recommended bidders were then invited to confirm/ modify their proposals based on a Barge Jetty as set out in Option B in the RFP and also include a variation of Option B that could facilitate a future use of coal berth using a vessel up to 48,000 DWT. However, this variation of Option B was not considered and was solicited for cost comparison purposes only. v) The resubmitted technical proposals based on Option B were then evaluated by Royal HaskoningDHV and the following scores were awarded out of a maximum score of 155: vi) vii) viii) ix) Bidder Score obtained CHEC NDRI 48.5 Subsequently, the bids were commercially evaluated based on Commercial Credits and Pricing Terms with each given equal weightage of 50% by a 4-member commercial evaluation team. According to the Commercial Evaluation Report, the following total prices were quoted by the bidders: Bidder Quoted Price Gross up for WHT (USD Million) (USD Million) CHEC NDRI The results of commercial evaluation are as follows: Bidders Commercial Credit Pricing Terms Total CHEC NDRI Based on the above evaluation, CHEC was recommended to be the preferred Jetty EPC Contractor by the Commercial Evaluation Committee. Based on the evaluation of the bidders, on June 14, 2016, CPHGCL signed contracts with China Harbor Engineering Company for Jetty Procurement and Construction Contract for a value of USD 90.4 million and with Zhen Hua Engineering (a wholly owned subsidiary of China Harbour Engineering Company) for Jetty Procurement and Supply Contract for a value of USD million. As per the Jetty Procurement and Construction contract signed with China Harbor Engineering Company, the Time for Completion has been defined as 27 months after the date of issuance of the Limited (j) 7

9 4+ :1.) Approval in the Matter of Coal Offloading Barge Jetty with CTS for CPHGCL Notice to Proceed. It is pertinent to mention that the Jetty's COD shall occur a few months prior to the COD of the power plant. Therefore, the effective period for calculation of ROE and IDC of Jetty shall be months instead of the agreed 27 months. 6.0 WHETHER CONSENT/APPROVAL/NOC FROM RELEVANT DEPARTMENT HAS BEEN TAKEN WHILE FINALIZING JETTY COST? 6.1 CPHGCL along-with its Application has provided a provisional NOC from the Ministry of Defense (MoD). The MoD vide letter dated October 28, 2016, provided provisional NOC and permission to construct Barge Jetty subject to compliance of the following conditions: a) Establishment of a security regime in compliance of ISPS Code with specific emphasis on Regulation 10 of Chapter XI-2 of Annex to International Convention of Safety of Life at Sea, 1974 and Section 14 to 18 of Part A and B of ISPS code. More specifically, this includes; i. Establishment of Terminal Facility Security Organization ii. iii. iv. Establishment of Terminal Facility Security Plan incorporation, physical security, structural integrity, personnel protection system etc. Conduct of training, drills and exercises on Terminal Facility System Conduct of periodic Terminal Facility Security Assessment b) Furnishing of documents/ certificates in compliance with ISPs Code six months prior the commencement of commercial operations. 6.2 MoD has taken on board following organization in the process of issuing NOC: 1) Joint Staff Headquarter (JSHQ) 2) Naval Headquarter (NHQ) 3) Pakistan Maritime Security Agency (PSMA) 4) ISI 6.3 CPHGCL has also obtained a conditional environmental approval from the Balochistan Environmental Protection Agency. Besides that, CPHGCL has also taken on board CPPA, PPIB, Ministry of Water & Power and N 1DC. 7.0 DECISION OF THE AUTHORITY REGARDING EPC OF JETTY 7.1 In pursuance of Para 49 of the decision of the Authority in the matter of coal upfront tariff dated June 26, 2014 and Para 106 of the review decision dated November 21, 2014 in the matter, an imported coal based power project opting for building a dedicated jetty 8

10 was required to ensure transparency and competitiveness in arriving at least cost coal offloading jetty facility. 7.2 In view of that, the Authority noted that CPHGCL carried out detailed studies not only for utilizing the existing infrastructure available at KPT, PIBT and PQA but has also thoroughly investigated the possible designs for a dedicated coal unloading Jetty which has led the Applicant to reach at a least cost solution. For this purpose, CPHGCL hired both local and international consulting firms including Royal HaskoningDHV, a leading international marine design consultant with vast experience in Pakistan including Gadani Power Park and KPT expansion to strengthen the design evaluation process. Royal HaskoningDHV presented all viable design options for a dedicated coal unloading Jetty solution and after detailed deliberations, the most optimal and least cost design solution, Barge Jetty with outsourced OLS, was opted. The capital cost of building a mother vessel jetty is approximately three times of the capital cost of building a barge jetty. Resultantly, the service cost of mother vessel jetty is approximately US$ 553 million higher than the service cost of barge jetty with CTS over 30 years project life. 7.3 A number of energy import terminals (PIBT, Engro Elengy Terminal, Port Qasim Coal Jetty, Pakistan Gasport Terminal, Sahiwal Coal Unloading Berth) have been setup. Additional energy projects in Port Qasim have increased congestion in the Port Qasim channel resulting in port delays for incoming and outgoing vessels. Moreover, Port Qasim channel has depth of less than 12 meter which means that vessels with less than 50,000 tons can be used to import coal. In comparison, CPHGC Coal Transshipment System has no draft restriction and can handle vessel size up to 186,000 tons which would result in significant freight savings. It is important to note that Port Qasim channel is surrounded by mangroves which make widening and dredging of existing channel extremely difficult due to environmental impact. The major technical challenge with construction of Mother Vessel Jetty was jetty length of 4.8 KM in open sea which resulted in high capital cost and completion time of 48 months. Although Feasibility Study proposed construction of 1.1 KM long breakwater but similar projects in the vicinity Karachi Cargo Village (KPT Project completed in 2016 after 5 years delay) and Gadani Power Park's Jetty Pre-feasibility study had estimated breakwater length of KM. In view of these factors, Mother Vessel Jetty had extremely high cost overruns and delay risk. On the other hand, Barge Jetty has a length of 1.1 KM and much shorter construction period. In order to handle large coal vessels, Barge Jetty requires Coal Transshipment System consisting of Panamax Floating Terminal, Barges and Tugboats, which has higher service cost than Mother Vessel Jetty. 9

11 7.4 Port handling charges are in the range of US$ 4 per ton which shall be saved in the instant case., the proposed coal unloading solution is designed to utilize Capesize vessels (having approximate capacity of 150,000 Tons) for the transportation of coal compared to a Panamax sized vessel (having capacity of 50,000 75,000 Tons). Market dynamics dictate that the larger the vessel, lower the freight per ton for coal shipment. Therefore, in the instant case, there would be a saving of approx. USD 1.5/ Ton on account of freight. The total saving on account of other cost and freight shall be USD 5.5/ Ton. 7.5 The Authority considers that CPHGCL has sufficed the requirement for a thorough investigation into changing the design of jetty in a way that least cost and reliable coal offloading solution is achieved. The Authority did not find any evidence that the bidding process for selection of EPC bidder was not transparent and competitive. In response to the advertisement for expression of interest, fourteen (14) companies from different countries including, United Kingdom, China, Turkey, UAE and Pakistan expressed their interest in project. CPHGCL hired an independent consultant to develop RFP and to assist the entire process for the selection of the EPC Contractor for the construction of the proposed dedicated coal unloading Jetty. After examining the documents provided regarding the bidding process, it can be established that CPHGCL and its consultant thoroughly evaluated each bid in the light of technical criteria and subsequently awarded scores and published two evaluation reports. Consequently, the recommended bidders were then evaluated on commercial basis and the lowest bidder was awarded the contract. Further, it was observed that no negative comments whatsoever, written or oral were received by the Authority challenging the bidding process or pointing out defects in the same. The Authority also noted that CPHGCL has fulfilled the requirement of taking all stakeholders onboard. Therefore, the Authority considers that the EPC price has been arrived through a sufficiently competitive and transparent process and therefore, the EPC price of US$ million net of withholding tax is being approved. Taxes, if any actually paid shall be treated as pass through subject to provision of verifiable documentary evidence for the payment with a maximum cap of US$ 6.65 million. 8.0 NON EPC COST 8.1 CPHGCL requested US$ 37.9 million on account of Non-EPC Cost. According to the Applicant, the Non-EPC cost shall cover the entire development and oversight related various costs including project administration, site security and surveillance, Engineering consultancy, other consultancy, insurance during construction, Staff 9044ER R NEPRA ""), AcKTHOR, %1, 44, 0.

12 Housing Colony, Jetty O&M Mobilization & Trainings, CTS Mobilization, Utilities during Commissioning, Inventory Buildup Cost and Regulatory Expenses. The breakup of the Non-EPC cost is provided hereuner: Non EPC USD Million Administration Expenses Site Security and Surveillance 2.60 Design and Construction Management Fee 3.04 Other Consultancy 5.71 Insurance During Construction 2.16 Staff Housing Colony 1.90 Jetty O&M Mobilization & Training 2.20 CTS Mobilization 1.80 Utilities during Commissioning 1.74 Inventory Buildup Cost 2.22 Regulatory Expenses 0.89 Total DECISION OF THE AUTHORITY REGARDING NON EPC COST 9.1 The Authority considers that the requested cost is substantially on the higher side. Sufficient cost has already been provided to the Applicant under the upfront tariff to cater for non-epc related cost. Since the jetty project is not a standalone project, rather is a project within a project, therefore, the Authority expects that the synergies between the two projects shall further reduce non-epc Cost. In view of the above, the Authority considers that 5% of the EPC cost shall be a reasonable estimate for the incremental non- EPC cost. Accordingly, USD 9.29 million is being approved on account of non-epc cost OPERATIONS & MAINTENANCE COST OF JETTY 10.1 For the smooth operations and maintenance of the Jetty, CPHGCL requested USD 4.16 million per annum and USD 0.19/Ton for fixed and variable O&M respectively. CPHGCL has not provided any contract agreements for the O&M of the Jetty. The requested O&M Costs were based on the figures provided in the feasibility study of the Jetty. Further, the Application does not clearly identify whether the Applicant intends to carry out O&M of the jetty itself or outsource it. 11

13 11.0 DECISION OF THE AUTHORITY REGARDING O&M OF JETTY The requirement of Para 49 to ensure transparency and competitiveness in arriving at least cost was not fulfilled by CPHGCL while requesting the O&M cost relating to jetty. Therefore, the Authority directs the Applicant to carry out a transparent and competitive bidding process for finalizing the O&M cost and re-submit the same for approval of the Authority with the maximum cap of USD 4.16 million per annum and USD 0.19/Ton for fixed and variable O&M respectively BIDDING PROCESS FOR THE COAL TRANSSHIPMENT SERVICES 12.1 As an integral part of the complete coal offloading solution, CPHGCL proposed Coal Transshipment Services (CTS) in addition to the dedicated Jetty. According to the information submitted by the Applicant, bidding process was carried out for selection of the Coal Transshipment Services Provider. The details of the bidding process are as under: i. Feasibility Study was carried out by Logmarin Advisors for CTS. ii. Logmarin Advisors also prepared the RFP for interested coal transshipers, evaluated the bids received in the matter and recommended the successful bidder. iii. An advertisement was published in the daily DAWN on April 7, 2016 for Expression of Interest (EOI) for Trans-shipment service provider on Build, Own and Operate (BOO) basis for a tenor of years. Interested parties were allowed until April 14, 2016 to submit EOIs. iv. In response to the advertisement, complete EOIs from the following 7 companies were submitted: 1. Augustea Holding SPA(Augustea) 2. C Transport Maritime S.A.M. (CTM) 3. Coeclerici Logistic SpA (Coeclerici) 4. Luis Dreyfus Armateurs SAS (LDA) 5. Raazip International Pvt. Ltd. (Raaziq) 6. Rocktree Logistics Pte. Ltd (Roctree) 7. SmitLamnalco Pakistan B.V. (Smit) 12

14 v. Subsequent to the lapse of the deadline for the submission of EOIs, China Harbour Engineering Company requested an extension for submission for EOI which was granted. vi. Logmarin evaluated the EOIs based on pre-defined criteria and disqualified Raaziq International due to lack of transshipping experience and ranked M/S Coeclerici Logistic at the top. vii. RFP was issued to the remaining 7 companies: 1) Augustea Holding SpA(Augustea) 2) C Transport Maritime S.A.M. (CTM) 3) Coeclerici Logistic SpA (Coeclerici) 4) Luis Dreyfus Armateurs SAS (LDA) 5) Rocktree Logistics Pte. Ltd (Roctree) 6) SmitLamnalco Pakistan B.V. (Smit) 7) China Harbour Engineering Company (CHEC) viii. The bids were then evaluated in three steps and disqualified M/S Smit and M/S LDA on the basis of inconsistency of their bids with the RFP. In the first step, bidders were ranked on the basis of the price quoted for annual minimum guaranteed quantity of 2 million tons/ annum and M/s China Harbour was found to be the worst amongst five (5) bidders. In the second step, bidders were ranked on the basis of the price quoted for above the minimum guaranteed quantity and M/s Coeclerici Logistic was found to be the most expensive amongst the four bidders, thus it was disqualified on this basis. In the third step, the bidders were evaluated on the basis of service price (including fixed cost, O&M and Bunker cost) quoted by the bidders and it was found that Augustea's bid was the most competitive amongst the remaining three (3) bidders. ix. Finally, the three bidders i.e., Augustea, CTM & Rocktree were invited for contract negotiations and were asked to submit updated proposals after taking into account tax and cost optimization. O NEP" t 1 3 AUTHORITY ti 11 43'

15 x. All three submitted updated proposals which were then evaluated technically and commercially by Logmarin. According to the "Overview of the Updated Proposals" document dated September 2, 2016, the results are as under: Capacity Fee [USD/day] 2nd Hand Vessel 15 Years Pre PPA COD Date Assumed considering 91 days 50% CF and remainin 0%CF Capacity Fee [USD/day] 2nd Hand Vessel 15 Years Post PPA COD Date RockTree Augustea CTM RockTree, Throughput Fee [USDA] Pre PPA COD Date 1.5 * BC discounted to 0.25 USD above 2 mtpa 1.22 Throughput Fee [USDA] Post PPA COD Date 1.12 * BC discounted to 0.25 USD above 2 mtpa 0.60 * 0.60 * Augustea CTM Otim u BC RockTree Augustea CTM O&M BC RockTree xi. Based on the above comparison, CTM with the lowest contractual value overall was declared as qualified. xii. CPHGCL initiated contract negotiations with CTM. However, CTM, informed CPHGCL vide letter dated October 26, 2016, that its board of directors have decided to withdraw from the bidding process due to allocation of resources to other shipping projects that shareholders are pursuing. 14

16 xiii. Accordingly, contract negotiations were undertaken with Augustea and CTS agreement was signed between the parties on 10th March 2017 at the following price post-cod for 15 years: Description CTS Fixed (Charter/ Capacity Fee) Units Agreed as per CTS Agreement USD /day 52,000 CTS Variable O&M USD/Ton 0.43 Bunker Cost (Fuel) USD/Ton 0.79 Indexation 80% of CF shall be indexed with US CPI annual 100% of cost shall be indexed with local CPI annually 100% of cost shall be indexed monthly with Light Diesel Oil price at Karachi xiv. The CTS agreement also entitles the contractor the following prices for 6 months or till COD, whichever comes earlier: Description CTS Fixed (Charter/ Capacity Fee) Units Agreed as per CTS Agreement USD /day 26,000 CTS Variable O&M USD/Ton 0.43 Bunker Cost (Fuel) USD/Ton 0.79 Indexation 80% of CF shall be indexed with US CPI annual 100% of cost shall be indexed with local CPI annually 100% of cost shall be indexed monthly with Light Diesel Oil price at Karachi 13.0 DECISION OF THE AUTHORITY REGARDING CTS 13.1 In pursuance of Para 49 of the decision of the Authority in the matter of coal upfront tariff dated June 26, 2014 and Para 106 of the review motion dated November 21, 2014 in the matter, an imported coal based power project opting for building a dedicated jetty was required to ensure transparency and competitiveness in arriving at least cost coal offloading jetty facility. Since CTS is an integral part of the entire coal offloading solution proposed by CPHGCL, therefore, in pursuance of the aforementioned decisions of the Authority, competitive bidding was carried out for the selection of Coal Transshipment Service Provider. 15

17 13.2 The Authority acknowledged that to reinforce the bidding process, CPHGC hired an internationally reputable consultant, Logmarin Advisors not only to provide assistance in the entire short-listing and selection process but also to carry out feasibility study and prepare well-structured RFP documents in this regard. Resultantly, it was observed that 7 international companies submitted completed EOIs for the coal transshipment of this complex project. The bids for CTS were also evaluated by Logmarin Advisors. The Authority also recognized that CPHGCL required bidders to re-submit their bids after taking into account detailed due diligence of local tax laws. The Authority has further recognized that indexation of bunker cost (fuel cost) with the prices of Light Diesel Oil reported by Pakistan State Oil (PSO) instead of any international index has simplified the process and resulted in payment in Pakistani Rupee. It was also observed that CPHGCL made all efforts to further negotiate the variable bid price quoted by the selected bidder. Given the above, the Authority has considered the process for selection of CTS contractor competitive and transparent and therefore approves CTS fixed fees of US$ 26,000 and US$ 52,000/ day for pre and post COD periods respectively, CTS variable O&M of US$ 0.43/ Ton and Bunker cost (Fuel) of US$ 0.79/Ton along-with the requested indexations ORDER 14.1 The Authority has approved the following costs for coal offloading barge jetty along with coal transshipment service in respect of the application filed by CPHGCL for its 2x660 MW imported coal based power plant located at Hub: i) EPC cost of US$ million net of withholding tax. ii) iii) iv) Withholding taxes, if any actually paid shall be treated as pass through subject to provision of verifiable documentary evidence with a maximum cap of US$ 6.65 million. Non-EPC cost of US$ 9.29 million. Custom duties & cess, sinosure fee, interest during construction, financing fees and charges will be increased to take into consideration the additional costs of jetty. v) The Applicant shall carry out a transparent and competitive bidding process for finalizing the O&M cost and re-submit the same for approval of the Authority with the maximum cap of USD 4.16 million per annum and USD 0.19/Ton for fixed and variable O&M respectively. vi) The following costs along-with indexations for CTS Post COD for 15 years:

18 vii) Description CTS Fixed (Charter/ Capacity Fee) Units Agreed as per CTS Agreement USD /day 52,000 CTS Variable O&M USD/Ton 0.43 Bunker Cost (Fuel) USD/Ton 0.79 Indexation 80% of CF shall be indexed with US CPI annual 100% of cost shall be indexed with local CPI annually 100% of cost shall be indexed monthly with Light Diesel Oil price at Karachi Following costs along-with indexations for CTS pre COD for a period of 6 months or till COD, whichever comes earlier: Description CTS Fixed (Charter/ Capacity Fee) Units Agreed as per CTS Agreement USD /day 26,000 CTS Variable O&M USD/Ton 0.43 Bunker Cost (Fuel) USD/Ton 0.79 Indexation 80% of CF shall be indexed with US CPI annual 100% of cost shall be indexed with local CPI annually 100% of cost shall be indexed monthly with Light Diesel Oil price at Karachi 15.0 TERMS AND CONDITIONS 15.1 Following terms & conditions shall apply: i) Due to the weather constraints of operating the barge jetty during the monsoon months, a maximum shortfall quantity of 600,000 tons shall be handled at alternative port (PKT/PQA). ii) iii) Port handling and inland transport charges of the shortfall quantity during the monsoon months shall be considered as pass-through. No provisions of the Bareboat Charter Agreement, Transshipment Agreement or Guarantee and Coordination Agreement shall be changed, amended or modified without the prior written consent of the Authority. 17

19 iv) The reference insurance during operation shall be 1% of 70% of total capital cost of power plant and Jetty. v) For the next 15 years, the project company shall seek prior approval of the Authority regarding Coal Transshipment Services and the cost shall not be higher than the reference cost adjusted for applicable indexations. vi) The above decision of the Authority shall be read with the approval of the Authority in the matter of coal upfront tariff vide No. NEPRA/TRF-342/CPHGCL- 2016/ dated February 12, NOTIFICATION 16.1 The above Order of the Authority shall be notified in the official Gazette in accordance with Section 31(4) of the Regulations of Generation, Transmission and Distribution of Electric Power Act, Authority (Himayat Lillah-j<han) -17) cvt.a, (Maj (R) Haroon Rashid) 17 Member Member (Syed :Hassan. Member (Saif Ullah Chattha) )_ Vice Chairman 18 2_2-17