Revised IPP deals: PD anticipates Rs3.5trn savings over 3-20 years

ISLAMABAD: The Power Division on Wednesday claimed that savings from revised/terminated contracts of 29 Independent Power Producers (IPPs) and Government Power Plants (GPPs) will be Rs 3.498 trillion on the remaining tenure ranging from 3-20 years.

Presided over by Senator Mohsin Aziz, the Committee was also informed that the Federal Cabinet has not ratified the decision of ECC regarding reduction in buyback rates of net metering consumers from Rs 27 to Rs 10 per unit for new connections.

Prime Minister has directed Power Division to review the policy in consultation with the stakeholders and bring a revised proposal.

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On the issue of contracts with the IPPs, the Committee was informed that pursuant to the efforts of Task Force, Power Purchase Agreements with 6 IPPs have been terminated, revised agreements for tariff reduction have also been initialed with 9 Baggasse Power Plants including Shah Taj Sugar Mill and 14 IPPs of Power Policy 1994 and 2002.

As per the relevant summaries of the Ministry of Energy (Power Division), the early termination of 5 IPPs would result in overall savings of around Rs 411 billion.

Further, savings on account of revised tariff terms with 8 Baggasse Power Projects and 14 IPPs of Power Policy 1994 and 2002 is estimated at around Rs 238 billion and Rs 922 billion respectively over the remaining life of these projects.

In addition, negotiations with GENCOS and Govt. owned RLNG Power Plants have also been concluded and approved by the Cabinet. Cumulative reduction in future capacity payments and related obligations, as a result of these negotiations, are Rs 354 billion from GENCOs (Nandipur & Guddu) and Rs 1,808 billion from Haveli Bahadur Shah, Balloki, QATPL Power Plants and Rs 498 billion from PTPL.

The Standing Committee was informed that impact of these negotiations and tariff reductions will be passed on to the consumers after approval of tariff modifications by Nepra, after which Prime Minister would make an announcement in tariff reduction.

During the proceedings, Minister for Power Sardar Awais Leghari and Opposition Leader in the Senate, Senate Shibli Faraz, exchanged unpleasant remarks on the issue of policies, incompetence of Power Division and a reported announcement by the Prime Minister to reduce electricity tariff by Rs 8 per unit and challenged Faraz to a public debate on the sector’s performance.

Leghari defended the Prime Minister and himself and the policies of incumbent government with respect to the power sector, adding that the SLA of IMF is proof that government’s policies are going in the right direction. He said revised contracts are being sent to NEPRA for regulatory process and the intention is to make the savings part of the QTA before a formal announcement is made.

Chairman Standing Committee argued that 40 per cent industry has already closed down due to energy prices and Federal Board of Revenue (FBR), with an additional 20 per cent expected to shut down with only 40 per cent expected to survive. He said, IPPs over invoiced their expenditure and they are the real culprits.

Senator Shibli Faraz maintained that investors are concerned due to change in policies mid-way due to which new investors will hesitate to enter the market. He severely criticised Power Division for altering existing Net Metering policy and called for sharing the names of all those Ministers and officials who are responsible for expensive power plants for “naming and shaming”. He further contended that the policies of the government are knee jerk, however, the Minister defended the policies saying that his government policies are the right policies.

Responding to questions, Power Minister acknowledged that affected companies mobilised their Ambassadors to exert pressure when the Task Force called for renegotiations of contracts.

Chief Executive Officer (CEO), CPPA-G stated that wind and solar projects which are about 40 are resisting revision in their contracts, citing less dispatches which are financially hurting them and in case of revision in contracts, they will go bankrupt.

On the issue of arrangement of loan of R1.23 trillion from banks, the Minister said that the amount would paid from existing Debt Servicing Surcharge (DSS) and after the entire process is completed which is expected next month, power sector circular debt which is Rs 2.4 trillion will come down to Rs 400 or Rs 450 billion.

Chairman Standing said that he is concerned that impact of revision in contracts is not being passed on to the consumers.

On the issue of Net Metering policy, Power Minister said that there will be no change for existing consumers, however, there will be change in new net metering consumers.

Copyright Business Recorder, 2025