ISLAMABAD: National Electric Power Regulatory Authority (Nepra) is reportedly facing a difficult situation over coal procurement by Port Qasim Electric Power Company (PQEPCL), as the power producer is seeking a further extension in its interim procurement arrangement despite the availability of more competitive offers through a fresh bidding process, well-informed sources told Business Recorder.
Sources said PQEPCL has approached senior-level officials of Nepra for another extension of a few months, although the interim period allowed by the regulator has already expired. The proposed extension, if granted, could delay the implementation of improved procurement terms and deprive electricity consumers of potential savings in generation costs.
The issue has also attracted the attention of the Power Division, which is reportedly opposed to any further extension of the interim arrangement on the grounds that consumers are not receiving the benefit of more competitive coal procurement rates.
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According to procurement details, PQEPCL initially entered into a long-term Coal Supply Agreement (CSA) with Wah Industries Limited (WIL) for the supply of coal at no discount against the applicable international coal price indices. The original contractual period covered May 2024 to April 2025. The agreement was subsequently extended to maintain continuity of coal supplies.
On April 23, 2024, PQEPCL initiated a competitive bidding process for a long-term coal supply arrangement covering September 2025 to August 2030, with June 14, 2024, set as the deadline for submission of bids.
Two suppliers participated in the process, offering discounts of USD 0.50 per tonne against the API-4 index, USD 0.10 per tonne against the ICI-3 index and USD 0.20 per tonne against the NEWC index.
However, litigation resulted in an interim injunction on January 2, 2025, affecting the execution of the coal supply agreements. The dispute was subsequently decided in favour of Awan, following which its contract was executed, although no purchase orders (POs) were issued to the company.
Meanwhile, PQEPCL extended its existing agreement with WIL for June 2025 to June 2027, with discounts of USD 1.08 per tonne against API-4, USD 0.20 against ICI-3 and USD 2.75 against NEWC.
On December 23, 2025, Awan improved its offered discounts to USD 1.25 per tonne against API-4, USD 0.30 against ICI-3 and USD 2.90 against NEWC. Despite the improved offer, the company was not awarded purchase orders, according to the procurement details.
In its Fuel Charges Adjustment (FCA) decisions for September and October relating to PQEPCL, Nepra subsequently restricted the WIL arrangement to the prescribed interim period and directed the company to undertake fresh competitive procurement for coal supplies.
Following the regulator’s directions, PQEPCL entered into an interim procurement arrangement with Yongtai Energy, a subsidiary of a Chinese company, for the supply of imported coal. The arrangement initially provided a discount of USD 0.50 per tonne for South African-origin coal, while Nepra directed the company to revise the applicable discounts to USD 1.08 per tonne against API-4, USD 0.20 against ICI-3 and USD 2.75 against NEWC.
The interim arrangement was intended to cover coal procurement during 2026 while PQEPCL completed a fresh competitive bidding process for long-term supplies.
On June 18, 2026, the Nepra Authority, after considering the relevant aspects of the matter, decided that since all shipments procured from Yongtai Energy had originated from Indonesia, a discount of USD 0.20 per tonne would be applied in calculating the price of each shipment. Accordingly, the fuel cost component of the energy charge in PQEPCL’s tariff was adjusted for variations in coal prices for March and April 2026.
The regulator also directed PQEPCL to conduct fresh competitive bidding for long-term coal procurement while allowing interim purchases subject to its directions.
The fresh procurement process has since attracted five bidders. According to the offers received during the second round of bidding, suppliers offered a discount of USD 2.10 per tonne against the API-4 index, while a premium of USD 5.45 per tonne was quoted against the ICI-3 index.
PQEPCL has received an offer for South African-origin coal carrying a discount of USD 2.10 per tonne, which has been described by sources familiar with the procurement process as the highest discount obtained by the company in its procurement history.
The improved API-4 discount represents an additional saving of USD 1.02 per tonne compared with the interim discount of USD 1.08 per tonne. However, the actual financial benefit would depend on the volume of coal procured, the applicable index and the terms governing the final contract.
In view of the improved offer, sources said the competent authority should direct PQEPCL to proceed with the ongoing bidding process and procure coal from eligible and responsive suppliers offering the most competitive terms in accordance with the applicable bidding documents.
They argued that delaying the transition to the new procurement arrangements, despite the availability of better discounts, could undermine the purpose of competitive bidding and adversely affect the financial interests of the power producer and electricity consumers.
“PQEPCL may seek further time to continue procuring coal from its existing supplier or suppliers at a comparatively lower discount, while delaying, withholding or cancelling the ongoing bidding process despite the availability of a discount of USD 2.10 per tonne,” an insider said.
The insider maintained that any extension or deferment could result in the loss of a substantial procurement benefit, ultimately affecting the cost of electricity generation and the tariffs paid by consumers.
According to sources, PQEPCL was required to complete the fresh bidding process and award the contract within the permitted interim period. They argued that, if the company had failed to complete the process within the prescribed period, the competent authority should enforce Nepra’s directions in accordance with their terms.
The issue has raised questions about the justification for further extensions when a fresh bidding exercise has produced a more competitive offer against the API-4 index.
Coal procurement costs constitute a component of the fuel cost of coal-fired power generation and are reflected in the relevant fuel cost adjustments. Consequently, delays in securing more favourable procurement terms could prevent potential savings from being realised, although the ultimate impact on tariffs would depend on the quantity procured and other applicable pricing components.
Sources said the regulator’s role was critical in ensuring that any extension required to maintain uninterrupted fuel supplies remained strictly limited to the minimum necessary period. They argued that Nepra should require PQEPCL to expedite the outstanding formalities and implement the results of the competitive procurement process without avoidable delays.
The Power Division is reportedly opposed to a further extension of the interim arrangement, as it believes that delays in implementing more competitive procurement rates could deprive consumers of the relief available through lower coal procurement costs.
The regulator’s decision on PQEPCL’s request, if formally submitted, is likely to be important in determining whether the company proceeds with the ongoing bidding process or continues procurement under its interim arrangements.
Copyright Business Recorder, 2026