The government has approved revised mechanism for payment of imported RLNG by Independent Power Producers (IPPs) to gas suppliers on a proposal of Water and Power Ministry after many `ifs and buts'.
According to official documents available with this correspondent Ministry of Water and Power took the stance at a recent meeting that in view of shortage of natural gas in Pakistan, the Government of Pakistan had decided to import LNG to meet local requirements and in this regard LNG Sale and Purchase Agreements have been executed by Qatar Gas with Pakistan State Oil Company Limited as the designated buyer of the GoP.
Under the LNG Supply Agreement, the GoP has allocated 85 MMCFD to Rousch Power and 30 MMCFD to Fauji Kabirwala Power Company Limited (FKPCL) on as and when available basis.
The Ministry of Water and Power and Ministry of Petroleum and Natural Resources had agreed upon payment procedure for RLNG.
The Ministry of Water and Power further revealed that the existing PPAs allowed CPPA to receive invoices on or after first day of every month for the electricity generated during the preceding months and make the payment 25 days after the receipt of invoices.
Thus there was a payment cycle of 55 days. Whereas the PSO had to pay the Qatar gas within ten days from the date of arrival of the ship.
This created a mismatch between payments terms under the PPA.
To remove this mismatch a mechanism was discussed and agreed between Rousch Power and Fauji Kabirwala and the power purchaser.
The Ministry of Water and Power maintains that the approved provisional mechanism would eliminate the mismatch between the payments commitment in supply chain. Change in the billing cycle on weekly basis will enable all the stakeholders (PSO, ENGRO, SNGPL, SSGC, IPPs and CPPA-G) to ensure timely payments to Qatar Gas and resultantly ensure continuous supplies of LNG to Pakistan.
Any disruption in the timely remittance of payments in the entire chain of payments is likely to jeopardise the uninterrupted supply of LNG to power sector.
It was further contended that the interim arrangement will be valid until the revised Gas Supply Agreement (GSA) is executed and the PPA is amended or till June 2018 whichever is earlier. Fauji Kabirwala has not so far furnished the requisite SBLC to SNGPL, preventing SNGPL to furnish SBLC to PSO.
The FKPCL was awaiting execution of this interim arrangement between IPPs and CPPA and SNGPL.
Thereafter, IPPs shall be in a position to open SBLC in favour of SNGPL.
In pursuance of the MoU signed between Ministry of Water & Power and Ministry of Petroleum and Natural Resources pertaining to the payment procedure of RLNG, a draft agreement was discussed in detail and finalised by M/s ROUSCH, FKPCL and CPPA. Salient features of the Draft Agreement are:- (i) CPPA is proposed to make payment to IPPs on weekly basis instead of existing contractual obligations of monthly payments as provided in the PPA, for this purpose;(ii) IPPs will provisionally bill CPPA based on SNGPL bill after 7 days of generation using RLNG and CPPA shall make payment within 03 days of receipt of such invoices;(iii) at the end of the month IPPs shall raise monthly invoices (Fuel+VO&M+GST) as per PPA and the provisional payments during the preceding months shall be accordingly adjusted;(iv) partial or total non-availability of the power plant due to non-availability of the RLNG or the swapped natural gas will be treated as other force majeure and ;(v) in case of delay in payments mark-up will be charged at the rate of KIBOR + 2%.
After detailed discussion, the meeting presided over by Finance Minister Senator Ishaq Dar approved executing an agreement by CPPA with M/S Rousch, FKPCL and Davis Energen pertaining to revised payment mechanism to facilitate payments of Imported RLNG by IPPs to gas supplier, according to the documents.
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