Arrangement through banks: Nepra to be asked to include Rs 20 billion in tariff

The federal government is to direct National Electric Power Regulatory Authority (Nepra) to include Rs 20 billion in tariff to be arranged from banks under the names of Discos, well informed sources told Business Recorder. Giving the details, sources said Government of Pakistan and Government of China entered into China Pakistan Economic Corridor (CPEC) agreement for the development of power projects under CPEC arrangement.
Pursuant to Article 5 of the agreement, CPPA-G is required to establish within 30 days of Commercial Operation Date (COD) of each IPP under CPEC, a revolving account with a commercial bank to cover the shortfall in power bills recoveries.
The sources said Power Purchaser (CPPA-G) will maintain revolving account for an amount not less than 22% of the monthly energy and capacity payments for each IPP. Accordingly, CPPA-G entered into Revolving Account Agreement (RAA) with HSR (Sahiwal Coal Power), Port Qasim Coal Power, UEP Wind Power Project and other IPPs.
HSR, Port Qasim Coal Power, UEP wind and Three Gorges Wind II & III achieved their COD during 2017 and 2018 and approached CPPA for establishment of revolving account.
The remaining IPPs under CPEC are also in the construction phase having their CODs with different time intervals. The sources further stated that CPPA-G remained in correspondence with National Bank of Pakistan (NBP) on the advice of Ministry of Finance as well as Ministry of Energy (Power Division) for assistance and guidance for the establishment of revolving account under the Revolving Account Agreement signed between CPPA-G and IPPs as already approved by ECC. In view of current situation of power sector circular debt, because of various reasons, there has been poor recovery of Discos and line losses beyond the regulator''s benchmarks set by Nepra. CPPA-G being a market operator is therefore, not in a position to open the revolving account by arranging the funds as proposed by Finance Division (CPPA own sources). Presently, an estimated amount of Rs 20 billion for six month based on 22% of estimated monthly capacity and energy payments would be required to meet the GoP commitment under Government to Government CPEC framework agreement.
The following estimates are for the projects which have achieved their COD and after due consultation of stake holders, the following case is submitted for consideration of the cabinet: (i) to authorize CPPA- G to get the revolving account opened through Power Holding (Private) limited (PHPL) on behalf of Discos, for CPEC projects i.e. HSR, Port Qasim Coal Power Project UEP Wind Power, and Three Gorges Second Wind Farm and three Gorges Third Wind Farm and arrange the credit line facility by PHPL amounting to Rs 20 billion; (ii) PHPL to arrange such credit line facility with scheduled banks to secure the payments for revolving accounts of these CPEC projects on behalf of Discos against sovereign guarantee (on behalf of GoP) from Ministry of Finance with scheduled bank(s). Revolving account will be replenished to the extent of credit limit available for these revolving accounts. Such payments may be treated as loan injection to the Discos. Servicing of this facility will be done by the sector; (iii) in a calendar month IPPs referred above cannot claim more than Rs 3.3 billion or the amount left whichever is lower against this credit facility in case the withdrawal in a month shall not be more than 22% of the monthly energy and capacity invoices of these IPP raised in the respective month; and (iv) Nepra will be directed to include the cost of servicing (on account of PHPL and CPPA only) of this loan in the tariff determination of the Discos to the extent of their contribution towards the revenue shortfall created.