The Economic Co-ordination Committee (ECC) of the Cabinet has approved an amendment to the agreement between Central Power Purchase Agency (CPPA) and MS Rousch, Fauji Kabirwala Power Company Limited (FKPCL) and Davis to remove mismatch in payment terms of energy under the Power Purchase Agreement and the Gas payments.
Sources said that in light of the shortage of natural gas in Pakistan, the government has 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 Stale Oil Company Limited (PSO) as the designated buyer of the government.
The gas will be supplied through the Gas Companies already working in Pakistan.
Out of the RLNG to be supplied to the SNGPL under the LNG Supply Agreement, the GOP has allocated 85 MMCFD to Rousch Power and 30 MMCFD to Fauji Kabirwala Power Company on as and when available basis.
The SNGPL has agreed to supply RLNG or swapped natural gas to the power companies.
The Ministry of Water and Power and Ministry of Petroleum and Natural Resources have agreed upon the payment procedure for RLNG.
The ECC was informed that the existing PPAs allow the CPPA to receive invoices on or after the first day of every month for the electricity generated during the preceding months and make the payment 25 days after the receipt of invoices.
There is a payment cycle of 55 days, whereas the PSO has to pay the Qatar gas within 10 days from arrival of the ship.
The meeting was informed that this creates a mismatch in payments terms under the Power Purchase Agreement and the Gas payments. To remove this mismatch a mechanism was discussed and agreed between the Rousch Power and Fauji Kabirwala and the Power Purchase CPPA.
This proposed provisional payment mechanism will eliminate the mismatch between the payments commitment in supply chain. Since the existing PPAs have been approved by the ECC of the Cabinet, as such, any deviation from the PPA will also require the approval of the ECC of the Cabinet.
Change in the billing cycle on weekly basis will enable all the stakeholders (PSO, ENGRO, SNGPL, SSGC, IPPs and CPPA) 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.
This interim arrangement shall be valid until the revised Gas Supply Agreement is executed and the PPA is amended or June 2018 whichever is earlier.
Fauji Kabirwala has not so far finished the requisite SBLC to SNGPL, which has prevented SNGPL to furnish the Stand By Letter of Credit (SBLC) to PSO.
The FKPCL is 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.
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