Chairman Wapda Lt. General Muzammil Hussain (retired) has reportedly opposed signing of power acquisition agreement between Neelum Jhelum Hydropower Company (NJHPC) and CPPA-G, saying that such an arrangement can affect future funding for hydropower projects, well-informed sources in Wapda told Business Recorder
This concern was conveyed to the Secretary Water Resources, who deals with the affairs of Wapda.
The Chairman Wapda stated that recently, with the evolution of professional management in the world, diversification of responsibilities/ authority and policy of decentralization has emerged. In line with this policy, large organisations tend to split their functions, authorities and responsibilities. Accordingly, GoP in late 90s started the process of unbundling of Wapda and its sub-organisations resulting in the formation of corporate bodies notably the Distribution Companies (Discos), National Transmission and Dispatch Company (NTDC) and Central Power Purchasing Agency- Guaranteed (CPPA-G).
In the wake of this scenario, GoP had been asking Wapda to implement new hydropower projects through independent companies with professional management; therefore, Advisor Finance and Revenue gave instructions on April 24, 2007 to execute Neelum Jhelum Project, through a company, which was implemented.
While arguing for continuity of the NJHPC company, the Chairman Wapda stated that: (i) Special Purpose Vehicles are defined in section 2(j) of the asset backed Securitization Rules 1999 and meant for the issuance of TFCs for raising finances. Therefore, legally speaking NJHPC is not an SPV. Instead, the company was established to construct and run the power companies; (ii) 17 per cent of the project was paid by the public stakeholders, subsequently given to Neelum Jhelum Company instead of Wapda; (iii) legally speaking if Wapda enters into a power Sale Purchase Agreement (SPA) with CPPA-G on behalf of NJHPC there will be serious legal implications of the arrangement as NJHC is a separately incorporated body; (iv) in continuation of the instructions of GoP all loans and liabilities of the projects completed by Wapda before the activation of the company, were transferred to the company through a business transfer agreement as was done with ex-Wapda Discos and now NJHPC company is responsible for the retirement of its liabilities. Wapda and MoF are only guarantors; (v) CPPA-G, previously NTDC had the understanding to negotiate a Power Purchase Agreement (PPA) with NJHPC as a company; (vi) CPPA-G in a letter on October 1, 2015 under the signatures of General Manager CPPA-G had mentioned its intention to negotiate power purchase contract with NJHPC. Also in the same letter CPPA-G requested Nepra permission to initiate power acquisition contract negotiation with JNHPC; (vii) Wapda has income tax exemption in Pakistan as well as AJK, whereas NJHPCs exemption from income tax in AJK is debatable. Further, Wapda and NJHPC both are taxable in respect of sales tax and there will be tax complications if Wapda enters into a contract for the sale of power produced by NJHPC with CPPA-G; (viii) if Wapda today accepts the point of view of CPPA-G to enter into contract with CPPA-G on behalf of its subsidiaries for power acquisition, there is a likelihood that commercial financing agencies within Pakistan and outside Pakistan may decline to finance future projects of Wapda where independent companies shall be established.
After explaining the NJHPC case, the Chairman Wapda has reiterated the stance of Wapda that power acquisition contracts of all its subsidiaries be signed separately with CPPA-G, adding that Wapda may provide some guarantees as sponsoring institution if specially desired.
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