ISLAMABAD: Minister for Power, Sardar Awais Ahmad Khan Leghari, on Thursday expressed gratitude to Army Chief General Syed Asim Munir for the honorable execution of mutually revised Power Purchase Agreements (PPAs) with five thermal Independent Power Producers (IPPs) totaling 2,400 MW.
“We are thankful to the Army Chief for his organization’s complete support, which made this possible. This is the first step towards short-term relief of Rs 8-10 per unit for consumers. Cumulative savings from these deals will amount to Rs 411 billion, providing approximately Rs 70 billion in relief to consumers, translating into a Rs 0.72 per unit reduction in tariff,” he stated.
The Minister noted that agreements have been signed with five IPPs -Hubco, Rousch, Atlas, Lalpir, and Saba - which will now be removed from the system. Under these agreements, the IPPs, whose contracts were terminated, including Rousch Power, Saba Power, Lalpir, Hubco, and Atlas Power, will receive their arrears without markup.
Reducing power tariff top priority: Awais
“We have not undertaken any actions with the IPPs that would undermine our business climate. I express my gratitude to the government’s team and the IPPs who negotiated mutually agreed terms and conditions,” he added.
He emphasized that private sector investors recognize that existing electricity prices are unsustainable and require revision. “We have also audited IPP profits in terms of heat rates, resulting in billions of rupees recognized from the IPPs. We have made the impossible possible,” he maintained.
The Minister also commended SAPM Muhammad Ali, National Coordinator of the Task Force Lt. Muhammad Zafar, and officials from PPIB, CPPA-G, and NEPRA.
He announced that the government has achieved savings of Rs 411 billion, which were previously destined for a few businessmen. Final deals will be completed in the coming days. The government will also pursue agreements with public sector power plants, nuclear power plants, and remaining IPPs to reduce tariffs.
The Minister mentioned that the government has begun debt re-profiling with Chinese CPEC IPPs; however, the tragic incident in Karachi, which resulted in the deaths of two Chinese engineers, has delayed this process. “The Karachi incident is a setback to our debt re-profiling plans,” he said, indicating potential delays in the associated MoUs.
He acknowledged the need for further reforms in the sector, including the establishment of an Independent System and Market Operator (ISMO). The NTDC will undergo restructuring, and CPPA-G will transition into ISMO with a defined role.
The Power Minister also stated that an ideal Winter Package for the industry, aimed at increasing electricity consumption without losses to the system, is being discussed in consultation with development partners. He noted that losses in three DISCOs—Hesco, SPECO, and Qesco—have increased over the past three months, while losses in other DISCOs have decreased.
Regarding the Rs 8-10 per unit short-term relief in tariffs, he detailed the financial impacts: negotiations with different plants will contribute Rs 3 or Rs 3.50 per unit reduction, re-profiling another Rs 3.75 per unit, and waivers from provincial electricity duties will provide Rs 0.65 relief per unit.
Additional reductions from sales tax and income tax will also contribute to a decrease in tariffs, while the reduction in RoE and profits from government power plants will have an impact of up to Rs 1.50 per unit. Agreements with IPPs established under the Power Generation Policy of 2002 will similarly impact tariffs by Rs 1.50 per unit.
In response to a question he indicated that converting imported coal power plants to local coal will take 3-5 years. He announced that a new policy for electric vehicle charging stations will be introduced, under which thousands of stations will be established. This policy will lower electricity rates, thereby increasing consumption.
In reply to s question, the Minister said that negotiations with IPPs will have positive impact on Discos privatisation, adding that the purpose of mutually agreed agreements was meant to restore the confidence of investors.
Copyright Business Recorder, 2024
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