The Abbasi-led government was in no mood to allow revival of 120 MW co-generation power project by Fatima Energy Limited (FEL), which insiders claim has been targeted by a 'club' of officials, well-informed sources told Business Recorder.
Giving the background, the sources said that the project has been processed by the PPIB under the Co-Gen Policy 2008. The company had filed a review petition due to non-acceptance of tariff announced by Nepra, which was disposed of by Nepra on October 18, 2016.
However, aggrieved by the tariff determination, FEL challenged it before the Islamabad High Court (IHC. Letter of Support (LoS) was issued to FEL on December 21, 2016 after fulfillment of pre-requisites. Later, the tariff determination was set aside by the court and the tariff petition filed by the petitioner was ordered to be deemed pending, ie, tariff determination would be done de novo which implies that for all legal and practical purposes, the clock was reversed to the stage before issuance of LoS with the effect that LoS was rendered infructuous and the concession granted based upon defunct tariff determination under the LoS was to be withdrawn immediately as with defunct tariff determination neither IA and PPA can be entered into nor FC can be achieved.
The matter was presented before the PPIB Board in its 112th meeting which approved withdrawal/cancellation of the LoS being infructuous, in the wake of court's order with retrospective effect (ie, from the date of Judgment). Accordingly, PPIB proceeded to terminate the LoS with effect from the order of the court, ie, September 6, 2017.
Managing Director, PPIB, Shah Jahan Mirza, informed that the Cabinet Committee on Energy (CCOE) on December 12, 2017 rescinded the Co-Gen Policy with immediate effect, while Nepra issued a new tariff determination for the project on January 18, 2018. In view of the tariff determination, FEL requested PPIB that the condition precedent for the issuance of LoS was fulfilled and, therefore, the termination notice for the LoS may be withdrawn.
The tariff given by Nepra is not in line with the Co-Gen Policy, it was noted. On the one hand Nepra's tariff is based on take-and-pay basis, while on the other the company is allowed to sell its electricity to both the bulk consumers and power purchaser (CPPA-G) thereby introducing multiple buyer mechanism.
PPIB is proposing to cancel the registration of the project as the Co-Gen Policy has already been rescinded by the CCoE and the tariff structure given by Nepra in its recent tariff determination is not in accordance with the Co-Gen Policy. The Board members discussed the circumstances under which the LoS of the company was previously cancelled/withdrawn and observed that these reasons still persist; as the tariff is still not in line with the Co-Gen Policy. Therefore, further processing of the project and revival/issuance of fresh LoS to the company is not warranted as per policy.
Upon further query, it was explained that although PPIB management is competent to cancel the registration of the project, however, since the matter is of a complicated nature due to involvement of legal and administrative issues, the Board's guidance was crucial for moving forward.
The Board Chairman stated that while deciding the fate of the project, PPIB Board should also take into consideration that a high level inquiry committee (constituted by the CCoE) has not yet concluded its findings and if the decision of the committee is in contradiction to what PPIB Board decides, the committee's decision would prevail.
Additional Secretary (Power Division) opined that the matter of cancellation of registration of FEL should be handled by PPIB management within the relevant policy/ law and the mandate of PPIB management. MD PPIB opined that although PPIB has recommended cancellation of registration, however if agreed by the Board the company's request for issuance of LoS may be refuted due to the tariff structure based on "take and pay" and introduction of multiple buyer mechanism as it is against the spirit of Co-Gen Policy without cancellation of the registration.
The CEO CPPA-G highlighted the legal implications with regard to existence of Co-Gen Policy (which has already been rescinded by the CCoE) and informed that the project company s wheeling agreement, duly approved by Nepra , is still in place whereas Nepra's tariff is also against the spirit of Co-Gen Policy, therefore, registration of FEL may be cancelled. Director Legal PPIB provided the legal opinion for cancellation of the project which is in line with the precedence of High Court decision.
The Board considered the matter at length regarding cancellation of registration of the project in the context of recently announced tariff by Nepra and agreed that PPIB management should look into the matter internally and suitable action as per law/ policy may be taken; keeping in view the ongoing inquiry and the possible impact of its decision in the matter.
After detailed discussion, the Board authorized the PPIB management to review various aspects of the matter and take suitable action as per law/policy regarding cancellation of the registration of Fatima Energy Limited (FEL) project. It was also decided that the request of FEL for revival or issuance of new LOS be declined by PPIB providing comprehensive reasoning.
The sources said, Power Division has decided to seek legal opinion of Ministry of Law and Justice prior to scrapping the project. According to these sources, a club of officials who were at senior positions in the Prime Minister House and in the Power Ministry did not want revival of the project on the agreed terms and conditions.