Minister says IPP deals won’t be altered unilaterally

ISLAMABAD: Minister for Power Awais Leghari said on Friday that the government will not unilaterally alter contracts of Independent Power Producers (IPPs) as a mutual consensus of sponsors of those projects is required, maintaining that any such action can create a situation like Reko Diq project.

He was responding to questions raised during the meeting of Senate Standing Committee on Power, headed by Senator Mohsin Aziz. IPPs contracts were the key agenda of the Committee.

Chairman Standing Committee stated that the Committee has received copies of IPPs contracts, which will be examined thoroughly.

PD working on Reko Diq project transaction

Senator Shibli Faraz sought the names of Ministers, Secretaries and Law firms who examined the contracts of IPPs before signing. He said that in Pakistan agreements with international companies are poorly negotiated due to which Pakistan has already lost many cases. He further contended that in the past flawed projects were established and hydel projects were subjected to a biased approach.

Responding to a volley of questions, Leghari said that if a contract allows the government to recover excess payment allegedly made to the IPPs then that amount will be recovered and savings will be ensured from available space. He said exact timeframe of report on IPPs will be shared next week.

Responding to a question on the proposal to the Minister to act like Muhammad Bin Salman, Crown Prince of Saudi Arabia, with respect to IPPs contracts, he replied that Pakistan has a Constitution and he cannot act outside the Constitution.

He said currently, there are 104 IPPs which are available for generation.

Replying to a question raised by Senator Shibli Faraz on maturity of IPPs, Minister for Power said that the government has divided IPPs into three categories including those retiring in two years.

The government wants to retire them from the system, the benefit of which will be that the government will save on all payments except RoE and offer present net value for the remaining life of the IPP which will save all other costs (in billions of rupees). In the total cost of energy, the share of fuel is 28 per cent, he said.

“Proper work on each plant is in progress including which plant has to be retained or retired or shifted on take-and-pay mechanism and there will be good news for the public in the near future,” Leghari added. He said electricity consumption declined by 8 per cent last year due to a variety of reasons.

“We are also reciting the Wazifa of “Rabi Sharahli Sadri” so that our prayers are answered,” he said, adding that the voice of the Standing Committee on IPPs is providing strength to the government.

CEO CPPA-G noted that in 2024, capacity payment was Rs 1.9 trillion whereas Rs 1.2 trillion was energy cost whereas in 2025 energy cost is Rs 1.26 trillion based on new tariff whereas capacity payment is Rs 2 trillion.

Chairman Standing Committee questioned why capacity payment increased multiple times when value of the dollar has remained more or less stable vis-à-vis the rupee during the last two years, Managing Director PPIB clarified that the value of the dollar appreciated in July 2023.

Minister Power repeated his previous stance that the PTI government had allowed 12 IPPs to go for international arbitration due to which the suggested investigation as per ‘Muhammad Ali Report’ did not take place, but the incumbent government intends to step in to deal with them through the Prime Minister’s Task Force as per the Report’s recommendation.

The Committee was informed that committed projects of 10,000-MW are in the pipeline including hydel, Chamsha-5 and some renewables. However, the government is reviewing the feasibility of Diamer Bhasha Hydropower Project as its electricity will not be cheap. The government wants to add only those projects into the system which are cheap.

Minister further stated that the government wants to retire those IPPs which are not required but the government cannot do it one-sided, adding that good news is expected in future.

According to an official statement, Nepra Chairman Waseem Mukhtar admits to decreasing electricity demand. Chairman of the National Electric Power Regulatory Authority (Nepra), Waseem Mukhtar, acknowledged a continuous decrease in electricity demand, revealing that the authority does not intend to add more capacity to the grid. Mukhtar stated, “Our electricity demand is continuously decreasing.”

Senator Shibli Faraz criticized Nepra’s independence and questioned its recent tariff adjustments. He inquired whether Nepra had increased electricity costs by three rupees instead of the anticipated five.

Faraz demanded transparency regarding the increase in electricity prices over the past two years and urged the provision of detailed reports on power projects nationwide.

Similarly, during the meeting, Awais Leghari said a Task Force has been constituted to scrutinize IPP, for which a task force has been established to closely examine IPPs, following recommendations from the Muhammad Ali Report. This report suggests a detailed study, including heat audits, though the focus has shifted towards arbitration rather than direct audits.

Additionally, the Committee debated load shedding and project costs. Awais Leghari also discussed the implications of load shedding and questioned the need for 1875 MW capacity if load shedding persists. Senator Mohsin Aziz raised concerns about the high cost of wind projects in Pakistan compared to international standards, urging a reassessment of why local projects are significantly more expensive.

The Committee underscored critical issues facing Pakistan’s energy sector, from regulatory challenges to escalating costs and project evaluations.

Copyright Business Recorder, 2024