The Independent Power Producers (IPPs) have refuted the charges leveled by the Senate Standing Committee on Power, saying whatever the committee has said is totally incorrect.
According to a press release, it was reported on the 12th of November that the Senate Standing Committee on Power recommended recovery of over Rs 39 billion from five Independent Power Producers (IPPs) allegedly overpaid by the Central Power Purchasing Agency-Guaranteed (CPPA-G).
This recommendation was based on the sub-committee's report adopted by the Senate Standing Committee which alleged that the IPPs had been paid outside the allowed tariff.
When contacted, a representative of an IPP stated that they have deepest respect for the parliamentary committees but in this case their verdict is apparently based on misinformation or lack of understanding of the issues involved.
They further mentioned that it is unfortunate that the Senate Standing Committee neither did take into consideration IPP's perspective nor were the IPPs invited to attend any meeting despite the fact that IPPs requested attendance in writing to the convener of senate sub-committee.
The time when the alleged IPPs invested in Pakistan, the country was losing almost 2% of GDP per annum on account of up to 18 hours of load shedding. The government introduced Power Policy in 2002 under which investors were encouraged to invest in the power sector of Pakistan. At that time no foreign investor was willing to invest in the country due to the then prevalent precarious security situation. Alleging that "IPPs hoodwinked Nepra at the time of tariff determination" is totally incorrect. Despite the then extraordinary investment and security risk of Pakistan, some investors took the risk and carried out a detailed feasibility study as required by the Power Policy of 2002 which was approved by the panel of experts engaged by PPIB. All the information provided at that time was from manufacturers of international repute based on their experience. All the contracts were executed as per provisions of the Power Policy where fixed heat rate was given without any mechanism of future adjustments. All risk and benefit of fluctuation was on the investors.
The Nepra independently carried out complete due diligence with regard to technical parameters and information relating to determination of the tariff. This was done with the consultation of all stakeholders by holding public hearings advertised in the national newspapers.
It may be noted that tariff was not determined as proposed by the IPPs but rather, as per the satisfaction of Nepra having it thoroughly scrutinized, verified and compared with Nepra's own upfront tariff offered for similar types of technology.
Furthermore, the tariff was approved as a whole inclusive of its various components. The tariff approved by Nepra was accepted as such by the IPPs and all stake-holders. On the basis of this approved tariff, the IPPs entered into several other third-party contractual arrangements which created third-party rights. Therefore, the profits made by the alleged companies strictly follow compliance with the said Agreements.
This is especially important to highlight that this unjustified bullying and harassing comes from all corners of regulatory and governmental circles at a time when the IPPs in general are facing a severe liquidity crunch, their receivables are at an all-time high with some on the verge of default.
It must be understood by those sitting in the responsible circles that circular debt is a structural problem and has been created due to difference in purchasing and selling prices, exacerbated by excessive transmission losses and uncontrolled recovery losses. It has nothing to do with the tariff and/or payments made to IPPs by the Power Purchaser. Here it is also worth noting that IPPs tariffs and receivables are backed by sovereign guarantees and any unilateral change would constitute default by the government on those guaranteed agreements.
The IPPs are willing and ready to sit at any reasonable forum including the Committee appointed by the government under the chairmanship of Muhammad Ali, Ex-chairman SECP, to present their case in a dispassionate and professional manner.
However, in case of any adverse unilateral action by CPPA-G or any other GoP body, the "alleged IPPs" would be left with no other option but to go for international arbitration in accordance of terms agreed to within executed Agreements. Such situation will be to the detriment of all stake-holders involved. Furthermore, such decisions will stifle investment in this sector.
Copyright Business Recorder, 2019
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