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ISLAMABAD: The newly-constituted committee headed by Chairman Federal Land Commission , Babar Yaqoob Fateh Muhammad, is extensively engaged with the Independent Power Producers (IPPs) to de-draft Power Purchase Agreements (PPAs) aimed at getting maximum relief, well-informed sources told Business Recorder.

"The committee has held meetings with most of the IPPs established under 1994 and 2002 power policies and conveyed to them the spirit of Terms of Reference (ToRs). However, a meeting with M/s Rousch and a couple of other IPPs is still pending," the sources said.

The committee, is also holding internal meetings as international shareholders are conveying their concerns.

IPPs are of the view that the main issue is related to new plants and Discos. The committee's negotiation should focus on capacity payments of new IPPs and actions to be taken in Discos can reduce power tariff by Rs 3-4 per unit as the old plants which are near to complete their agreements cannot contribute optionally.

With a fifty percent reduction in Libor plus and a increase in tenor of project from 10 years to 25 years, a relief of Rs 1.50 or Rs 2 can be made. The plants established under power the policies of 1994 and 2002 can only contribute 10 paisa per unit relief to the government.

The committee has obliquely asked the IPPs to shift from take or pay to take and pay contract terms and indexation from USD to PKR, well informed sources told Business Recorder.

The committee, which also comprises a Joint Secretary from Power Division, Muhammad Ali, former Chairman, Securities and Exchange Commission of Pakistan and Barrister Qasim Wadood, has also asked the IPPs to return the "excess" payments they received as pointed out in the report of committee headed by Muhammad Ali.

The nine-member committee headed by Muhammad Ali, in its report, which is said to have been withdrawn after pressure from international lenders, has recommended the government to shift from US dollar to PKR-based tariff and do away with take or pay arrangements with the IPPs.

According to the Terms of Reference (ToRs), the new committee is engaged with various IPPs to negotiate on the amounts, rationale and mechanism of excess payments of the past under specific heads as well as due to systemic oversights highlighted in the report, reduction of interest rate and payments on debt and other components, extension of debt tenor etc, and agree on changes required to ensure avoidance of these payments in future. "Excess" payments are not restricted which was not highlighted in the report and the Negotiation Committee may look into the excess payments which may not have been covered in the report.

The committee is negotiating on a claw back mechanism for sharing efficiency and other gains and savings in the future between power purchaser and IPPs. These may be subject to verification of various cost, implementation of cost accounting order, heat rate verification of various cost, implementation of cost accounting order, audit, etc. as the Negotiation Committee deems fit.

The committee is also asking IPPs to change their rate and formula or their profits, return on investment and Internal Rate of Return (IRR) from USD to PKR basis without any USD indexation.

The committee has also conveyed to the IPPs with respect to modalities and mechanisms for shifting from take or pay contract terms to take and pay contract terms.

The committee can negotiate with IPPs on any other terms, conditions, payments, etc, besides those already conveyed in writing to the IPPs.

The committee is authorised to coordinate with Power Division, Nepra, CPPA-G, PHL, PPIB, AEDB, etc., for any actions that may be required from these organisations towards achieving the objectives of ToRs.

The committee will document the understanding reached with IPPs towards achieving the objectives of these ToRs. The committee will recommend IPPs should be considered either for retirement or for detailed forensic audit. The sources said, IPPs are being asked to return the excess amounts they received, which according to the nine-member committee's inquiry report was over Rs 100 billion.