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OPWP won’t grant extensions for expiring power purchase agreements

26 Oct 2021 OPWP power By GULAM ALI KHAN

Muscat – Oman Power and Water Procurement Company (OPWP), the sole procurer of all electricity and water production capacity in the sultanate, would not grant extensions to the four power generating companies whose power purchase agreements will expire by the end of 2021 or early next year.

Four power generating companies – ACWA Power Barka, Al Kamil Power, Sohar Power and SMN Power Holding – have received letters from OPWP informing them about the annulment of the Power 2022 procurement process.

OPWP’s Power 2022 project is an implementation of the new procurement strategy for power and related water projects involving existing generators. OPWP had received tariff proposals from four existing power generators – ACWA Power Barka, Al Kamil Power, Sohar Power and Al Rusail Power – participating in the Power 2022 procurement process.

In a disclosure submitted to the Muscat Stock Exchange (MSX) on Tuesday, ACWA Power Barka said, ‘The company has received a letter from OPWP informing the annulment of Power 2022 procurement process. The company, therefore, will not be granted a power and water purchase agreement extension after the expiry date of December 31, 2021.’

In a similar disclosure, Al Kamil Power also confirmed about receiving the OPWP letter notifying the annulment of Power 2022 procurement process. It said, ‘The company will not be granted a power purchase agreement extension beyond December 31, 2021, the expiry date of the current agreement.’

Sohar Power informed the MSX that it is assessing all the options available to continue its operation beyond the expiry of the current power and water purchase agreement with OPWP, including operating under the upcoming Electricity Spot Market.

SMN Power Holding also received the letter from OPWP regarding the Power 2022 tender in which its subsidiary Al Rusail Power participated.

‘OPWP has issued a formal notice to Al Rusail Power on the annulment of Power 2022 procurement process. Thus, there will be no extension of the power purchase agreement between OPWP and Al Rusail Power and the agreement will terminate on March 31, 2022 in accordance with the existing terms and conditions,’ SMN Power Holding said in a disclosure to the MSX.

Electricity Spot Market

OPWP, however, has invited the above-mentioned companies to participate in Oman’s Electricity Spot Market which will go live before the end of this year.

OPWP is developing the Middle East’s first wholesale Electricity Spot Market. The aims of the Spot Market initiative include improving efficiency and transparency in the electricity sector, providing opportunities for diverse generation sources that do not compete in OPWP’s normal tender process, and providing an option for the continued participation of existing generation plants whose power purchase agreements have expired.

Al Kamil Power in its disclosure said, ‘OPWP stated in their letter that the Electricity Spot Market is planned to go live before the end of the current year, and the company is invited to participate in the said spot market.’

However, Al Kamil Power had appointed an independent consultant to conduct a study to assess the revenues that the company can expect to generate from the Electricity Spot Market. ‘The study concluded that the level of revenues that the company can expect to generate from the spot market will be negligible and hence will not be economically feasible for the company,’ Al Kamil Power said.

ACWA Power Barka said, ‘The OPWP letter mentioned that the Electricity Spot Market is on track to go live in January 2022 onward. The company is assessing all options available to continue its operations beyond expiry of its power and water purchase agreement.’

SMN Power Holding also said that it is assessing the feasible alternatives available [for Al Rusail Power], including the participation in the Electricity Spot Market.

The Electricity Spot Market will enable OPWP to purchase the required electricity on a daily basis through the offers received from generation companies.

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