ISLAMABAD: The government has reportedly not yet finalised instrument to clear Rs400 billion outstanding receivables of Independent Power Producers (IPPs) which is mandatory to convert Memoranda of Understanding (MoUs) into agreements, well-informed sources told Business Recorder.
Finance Ministry and Power Division had sought opinions from the energy sector experts, compliant with the condition imposed by the International Monetary Fund (IMF).
The sources said, one key energy sector expert engaged an international consultant and took State Bank of Pakistan and commercial banks on board to find out a mechanism to clear the outstanding amount of IPPs.
"In the MoUs, the main condition is that these MoUs will be converted into agreements, once the due payment is made to the IPPs," the sources added.
According to the action plan, two separate specialized committees were formed to address the issues.
One committee was given the task of monitoring the following issues: (i) IPPs to file petitions for revision of tariff determination by Nepra on ground of MoUs; (ii) revision of tariff by Nepra on the basis of MoUs;(iii) notification of revised tariff by GoP;(iv) any allied changes in the PPAs and;(v) for IPPs, before Nepra regime, make the changes in tariff and PPAs as per terms of MoUs.
However, when the MoUs Execution Committee was formed, the energy sector experts were again invited to brief it as two new members, i.e. SAPM on Power, Tabish Gohar and Secretary Power, Ali Raza Bhutta were unaware of previous discussions. The proposed funding instrument has also been shared with the IMF so that payments could be made to the IPPs to convert MoUs into agreements.
IMF, sources said, did not agree with the proposal meant to clear the outstanding receivables of IPPs.
The Committee which negotiated with the IPPs had proposed an Execution Committee under the chairmanship of Minister Omar Ayub which was cleared by the Cabinet Committee on Energy (CCoE). However, when the decision of the CCoE was placed before the Federal Cabinet, the chairmanship of the committee was given to Prime Minister's Advisor on Finance, Dr. Abdul Hafeez Shaikh.
The sources said, the Execution Committee has held one or two meetings to discuss different funding options to clear the IPPs receivables amounting to Rs400 billion which have now reached Rs450-475 billion.
The issue of payables also came under discussion in the ECC meeting held on November 4, 2020. The ECC constituted a committee to find out a mechanism to resolve this chronic issue, which has choked the entire energy sector.
When contacted, representative of the IPPs told Business Recorder that there will be no progress on this matter till the payment to the IPPs, which was primary condition to proceed further.
"The ball is now in the court of government. We will not move an inch until payments are made," he added.
The government believes Rs856 billion will be saved in the next ten years on account of negotiations with the IPPs.
According to sources, the financial impact of agreements with IPPs, government owned IPPs and closure of government owned old power plants would be around Rs1000 billion over a period of seven to 10 years.
Copyright Business Recorder, 2020
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