17 IPPs of 1994, 2002 policies: Deal reached on hybrid ‘take and pay’ model

ISLAMABAD: The government’s task force on energy and 17 Independent Power Producers (IPPs) of Power Policies of 1994 and 2002 have reportedly reached an agreement on a hybrid ‘take and pay’ model amicably after more than two weeks’ of extensive and hard discussions in Rawalpindi in the presence of high-ups, well-informed sources told Business Recorder.

The task force headed by Minister for Power, Sardar Awais Khan Leghari and comprising SAPM on Power, Muhammad Ali, National Coordinator, Lt. General, Muhammad Zafar Iqbal, Chairman NEPRA, CEO CPPA-G, Managing Director, PPIB and experts from NEPRA, CPPA-G and SECP, is engaged with the IPPs of 1994 and 2002.

However, the number of signatory IPPs has not been confirmed by the government side or IPP representatives. Last week, the government had confirmed that 11 IPPs out of 17 have signed revised pacts.

Revised PPAs inked with about one dozen IPPs

On Wednesday when confirmation of revised agreement with 17 IPPs was released, one of the members of task force said, ‘no, no’ and promised to explain it next week.

Some of the IPPs, however, informally, are complaining of highhandedness by some of the officials who are supporting the Task Force.

The government is expecting a saving of up to Rs 200-300 billion. Legal teams of both sides also shared their views on the proposed revised draft Power Purchase Agreements (PPAs) and Implementation Agreements (IAs), now to be approved by the Cabinet prior to submission for determination of their new tariffs by the National Electric Power Regulatory Authority (NEPRA).

According to the PPIB’s website, the individual capacity of each IPP, with whom negotiation had started, are as follows:

Uch-I Power Limited of 586 MWs( COD, October 18, 2000)

Pakgen Power Limited of 365 MWs( COD, February 1, 1998),

Liberty Power Daharki Ltd 235 MWs (COD September 10, 2001),

Kohinoor Energy 131 MWs (COD, June 20, 1997),

Fauji Kabirwala Power Company Limited 157 MWs (COD October 21, 1999),

Attock Gen Limited (165 MWs)(COD, March 17, 2009),

Engro Power Gen Qadirpur Limited 227 MWs( March 27, 2010),

Foundation Power (Daharki) of 185 MWs( COD May 16, 2011),

Halmore Power Generation Company 225 MWs (COD June 25, 2011),

Liberty Power Tech Limited 200 MWs (COD, January 13, 2011),

Hubco Narowal Energy Tech Limited 220 MWs(COD April 22, 2011),

Nishat Chunian Power Limited 200 MWs (COD, July 21,2010),

Nishat Power Limited 200 MWs (COD, June 9, 2010),

Orient Power Company 229 MWs (COD May 24, 2010),

Saif Power Limited 229 MWs( COD, April 27, 2010),

Saphire Power Limited 225 MW(COD October 5, 2010),

the first hydropower project i.e. New Bong Hydel IPP 84 MW of Laraib Energy Limited, (COD, March 03, 2013 and

Uch-II Power Project of 404 MWs(COD April 4, 2014).

Nishat Chunian Power Limited (NCPL) has formally informed the Pakistan Stock Exchange (PSX) that it has agreed on ‘Hybrid Take and Pay,’ model.

The Company informed Pakistan Stock Exchange that the Board of Directors of Nishat Chunian Power Limited Company during their emergent meeting held on December 04, 2024 approved the amendments to Power Purchase Agreement, Implementation Agreement and to revise tariff as proposed by the Task Force constituted by the Prime Minister of Pakistan to convert the existing tariff to ‘Hybrid Take and Pay’ model. The Board also approved to execute Amendment Agreement with the Government of Pakistan and the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) to implement the proposed amendments.

Some salient of terms and conditions are as follows: (i) the Amendment Agreement shall be effective from November 01, 2024; Indexation mechanism of O&M has been changed; (ii) tariff of cost of working capital and O&M has been rebased; (iii) return on equity tariff component, will be paid in a hybrid take and pay mode; (iv) insurance premium tariff is capped at 0.9% of EPC cost; (v) the Company will share profits till FY’23 and it will be adjusted, against receivables from CPPA; (vi) GoP will unconditionally withdraw Arbitration under Arbitration Submission Agreements; (vii) the undertaking provided to the Power Purchaser by the Company to retain its receivables till the conclusion of Arbitration under ASA shall be returned; (viii) payment of outstanding receivables as on Oct 31, 2024 within in 90 days of approval of the Agreement by the Cabinet; (ix) waiver of Delay Payments till Oct 31, 2024; and (x) LCIA Arbitration clause in PPA will be substituted with Islamabad seated Arbitration under the local laws.

The sources said, with signing revised pacts with 17 IPPs, the total number of IPPs has reached about 30 of which 5 are from pre-1994 and 1994 and 2002(Atlas Power Limited), 8 baggasse IPPs and 17 for power policies of 1994 and 2002.

The next round will start with GoP-owned power plants and renewable energy projects, both wind and solar.

The government is expecting a reduction of Rs 3.50 per in tariff from revision of IPPs which may reach Rs 6.50 per unit after re-profiling of debts of Chinese IPPs, if Beijing agrees.

Copyright Business Recorder, 2024