Deals with IPPs: Nishat Chunian Power approves revised agreements with govt

Nishat Chunian Power Limited (NCPL), an Independent Power Producer (IPP), has approved the implementation of amended agreements with the government.

The development was shared by NCPL in its notice to the Pakistan Stock Exchange (PSX) on Wednesday.

“We have to inform you that the Board of Directors (BoD) of NCPL in their emergent meeting held on December 04, 2024 has approved the amendments to Power Purchase Agreement, Implementation Agreement and to revise tariff as proposed by the Task E constituted by the Prime Minister of Pakistan to convert the existing tariff to ’Hybrid Take and pay model,” read the notice.

The IPP informed that the BoD also approved executing the Amendment Agreement with the Government of Pakistan (GoP) and the Central Power Purchasing Agency (Guarantee) Limited (CPPA) to implement the proposed amendments.

The development comes as the government seeks to renegotiate or scrap contracts with IPPs in a bid to address financial challenges and streamline the power sector.

NCPL further shared terms and conditions of the agreement: “The Amendment Agreement shall be effective from November 01, 2024; Indexation mechanism of O&M has been changed; tariff of cost of working capital and O&M has been rebased; return on equity tariff component, will be paid in a hybrid take and pay mode.

Under the amended agreement, “the insurance premium tariff is capped at 0.9% of EPC Cost; the company will share profits till FY’23 and it will be adjusted against receivables from CPPA; GoP will unconditionally withdraw arbitration under Arbitration Submission Agreements (ASA).

As per the terms and conditions, “the undertaking provided to the power purchaser by the company to retain its receivables till the conclusion of arbitration under ASA shall be returned; payment of outstanding receivables as on October 31, 2024 within 90 days of approval of the agreement by the Cabinet; waiver of delay payments till October 31, 2024; and LCIA Arbitration clause in PPA will be substituted with Islamabad seated Arbitration under the local laws.”

NCPL runs a fuel-fired power station having gross capacity of 200 MW and net capacity of 195.722 MW. It entered into a Power Purchase Agreement (PPA) with its sole customer, CPPA-G, for twenty-five years which commenced from July 21, 2010.

Days ago, Business Recorder, citing its sources, stated that the government’s energy task force has reportedly signed revised PPAs with about a dozen IPPs established under Power Policies of 1994 and 2002.

Last month, Rousch (Pakistan) Power Limited (RPPL) approved the early termination of its long-term agreements with the government and also authorised its management to execute a negotiated settlement agreement.

In October, Hub Power Company Limited (HUBCO), Pakistan’s largest IPP, initiated a negotiated settlement agreement with the government.