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ISLAMABAD: The Cabinet Committee on Energy (CCoE) which is scheduled to meet on Thursday (today) with Minister for Planning, Development and Special Initiatives, Asad Umar in the chair will consider Independent Power Producers (IPPs) report prepared by a special committee headed by Chairman Federal Land Commission, Babar Yaqoob Fateh Muhammad.

Official sources told Business Recorder that Power Division will give detailed presentation on the MoUs signed with the IPPs along with estimated financial impact of the pacts on circular debt, consumer end tariff and other benefits during the next 7-10 years.

The committee will also discuss the impact of government owned IPPs along with mode of payment to clear their receivables of hundreds of billions of rupees.

Prime Minister Imran Khan has already been given detailed presentation on the pacts signed with the IPPs and future line of action.

As the CCoE clears the IPPs report, it will be submitted to the federal cabinet for final nod next week. According to sources, the financial impact of agreements with IPPs, government owned IPPs and closure of old power plants would be around Rs 1000 billion over a period of seven to 10 years.

The savings under power policy 1994 would be Rs 225 billion, followed by Rs 200 billion under generation policy 2002 and over Rs 250 billion under power generation policy 2006 during the life of these projects.

However, the agreements between the government and IPPs will materialize once the former clears IPPs receivables which are around Rs 400 billion.

IPPs signed MoUs are applicable for six months with the government subject to acceptable payment instrument of IPPs receivables.

"A lot of discussion has already been held on payment mechanism of IPPs receivables. One possibility is issuance of zero coupon bonds as commercial banks are agreed to this scheme," said one of the representatives of IPPs.

The government is expected to constitute another extended committee, which will include some existing members as well as a few new members from Finance Ministry etc. Power Division and Nepra have also been taken on board on the MoUs.

The committee will take the MoUs forward and convert them into agreements and ensure payments to the IPPs.

In case of private IPPs, concessions to be given to government would be an integral part of payment of receivables.

IPPs are of the view that they are placing billions of rupees on the table as concession to the government for future but these concessions will be applicable only when the government will clear hundreds of billions of dues.

However, revision in agreements of power plants established under China Pakistan Economic Corridor (CPEC) will be made during the forthcoming visit of Chinese President as both countries have reportedly agreed on revision of agreements on the pattern of IPPs. The outgoing Chinese ambassador to Pakistan has played key role in evolving consensus between the two governments.

The Cabinet Committee on Energy (CCoE) has also decided to settle payables of government owned power plants amounting to Rs 357 billion as of June 2020 at par with settlement with Independent Power Producers (IPPs).

The government has also decided that return on equity of the Quaid-e-Azam Solar Park should be included for a reduction to 17 per cent IRR (rupee based) recalculated using USD rate of Rs 148/ USD - or given a similar treatment to other government IPPs.

The CCoE has directed Power Division to consider reduction in Rate of Equity in government IPPs upto 10 per cent and fix it in rupee terms rather than in dollars.

The CCoE also took the following decisions : (i) return on equity of the Quaid-e-Azam Solar Park should also be included for reduction to 17 per cent IRR( rupee based) recalculated using USD rate of Rs 148/ USD as similar treatment to other government IPPs;(ii) the financial settlement of payables to government owned power plants shall also be considered at par for any future settlement with IPPs pursuant to the ongoing negotiations by the IPPs committee; (iii) the financial benefit to Wapda, if any, due to reduction in RoE shall be arranged through PSDP funding for implementation of mega development power projects i.e. Diamer Basha, Mohmand and Dasu;(iv) the financial deficit to Gencos, if any, due to reduction in RoE shall be funded by Finance Division to support loss making Gencos and ;(v) Power Division to submit information regarding payables to government owned power plants to the CCoE for information.

The sources said, Power Division has been directed that necessary process/ approvals for submission of tariff revision petition to Nepra should be completed immediately.

The government has also decided that financial settlement of payables to government owned power plants (Rs 357 billion as of June 2020) shall also be considered at par for any future settlement with IPPs.

The government has also decided to close defunct plants (Gencos) of 1519 MW which will result in saving of Rs 5.674 billion per annum CPP. There are 2,015 working employees and 2,077 pensioners attached to these plants whose annual salaries and pension impact is Rs 1.326 billion and Rs 2.9121 billion respectively. The accumulated liability on account of pensionary benefits amounts to Rs 24.614 billion as on June 30, 2020.

The plants / units to be retired are as follows: ( i) TPS Jamshoro( unit 2&3) 340 MW ( strategic asset);(ii) GTPS Kotri( unit 3&7) 130 MW( delicenced by Nepra);(iii) Block 3&4, 450 MW( delicened by Nepra);(iv) TPS Quetta, 22 MW( delicenced by Nepra) ;(v) TPS Muzaffargarh (5&6), 355 MW;(vi) SPS Faisalabad units 1&2) 92 MW( delicenced by Nepra);(vii) GTS Faisalabad ( units 1&4) ,75 MW( delicenced by Nepra);(viii) NGPS Piranghaib, Multan ( units 1, 3 & 4) 192 MW( delicenced by Nepra);(ix) GTPS Shahdara ( units 1 to 6) 85 MW and ;(x) FBC Lakhra ( units 1&2) 70 MW.

Retained plants will result in saving of Rs 8.608 billion per annum and permanent reduction in capacity by 2475 MW. There are 2,987 working employees and 2,215 pensioners attached with these plants whose annual salaries and pensions impact is estimated at Rs 2.318 billion and Rs 4.416 billion respectively. The accumulated liability on account of pensionary benefits amounts to Rs 37.560 billion as on June 30, 2020.

TPS Jamshoro 400 MW ( units 1& 4) will be retained during low wind; GE Block( units 5 to 10) 415 MW to be retained on merit order; Siemans Block( units 11 to 13) 413 MW to retained if unit 13 is restored; 747 KW Block ( units 14 to 16) 747 to retained; TPS Muzaffargarh( units 1 to 14) 920 MW to b retained in the system as contingency reserve with gas fuel; GTPS Faisalabad ( units 5 to 9) 140 MW will be retained till commissioning of Trimmu power house and also reactive compensation in Faisalabad area till installation of SVC and 525 MW CCPP Nandipure 525 MW to be retained on merit order.

Talking about impact of plants on active list for privatisation, the sources said, privatisation model will be decided by Privatisation Commission. However, there are 634 working employees and 498 pensioners attached with the plants whose annual salaries and pensions impact is Rs 305 million and Rs 666 million respectively. The accumulated liability on account of pensionary benefits amounts to Rs 10.293 billion as on June 30, 2020.

Copyright Business Recorder, 2020