ISLAMABAD: The government and around two dozen Independent Power Producers (IPPs) are said to have initialled the agreements, subject to approval from the boards and government of Pakistan, well informed sources told Business Recorder.
The government, sources said, has also conveyed its consent to pay 40 percent of Rs 450 billion as a first instalment soon after the signing of final agreements whereas 60 percent will be paid in one go during the next fiscal year i.e. after July this year.
"Government will pay some portion of amount in cash to the IPPs, while PIB and Sukuk will be given as instruments," the sources added.
Previously payment to the IPPs was to be paid in three installments, which has now been revised to two instalments to facilitate power projects, the sources said, adding that payment plan has been improved by the Finance Minister Dr Abdul Hafeez Shaikh, who is engaged in second staff review talks with the International Monetary Fund (IMF).
Some of the power companies, which have initialled the agreements, are M/s Rousch, M/s Lalpir Power Project, M/s Pakgen Power, M/s Engro Power (gas based), M/s Orient Power, M/s Saif Power, M/s Saphire Power, M/s Halmore Power Generation, M/s Atlas Power and baggasse-fired power plants. Two solar power companies have also initialled it.
The sources maintained that there are issues with wind power projects, which are insisting that their foreign lenders should be contacted for an agreement. The government, however, is resisting it, saying that it will talk with sponsors not the lenders, as by doing so the issue will go another way.
"Wind power projects of DFIs (Development Financial Institutions) are asking Government of Pakistan to share entire reform plan with them, including what is being discussed with the World Bank," they added.
Tariffs given to these projects are 15 Cents, 16 Cents, which are on the higher side. Power Division did not want to accommodate these projects but the World Bank's high ups met the Prime Minister Imran Khan and forced the Power Division to ink agreement with them. The agreements were signed with them on zero equity, an official told on condition of anonymity.
"A handful yet to sign the agreement but I think they'll come around too. It is okay if not everyone signs. We’ll continue the negotiations with the latter. All of them are equally incentivised to get paid their past receivables," said another official.
The lenders of wind power projects are also seeking details of circular debt elimination mechanism and improvement in payment to the power sector.
"We have asked to sign agreements and if they are not willing, then pacts with them will be finalised later on," the sources continued.
A couple of days ago, SAPM on Power Tabish Gauhar said to reduce circular debt and tariff, the government has taken a number of measures and more needs to be done. He said MoUs were signed with 53 IPPs, which are now in final phase and will be converted into agreements within the next few days. He further noted that financial burden of Rs 836 billion will be reduced in the next 20 years due to these agreements. Also receivables of IPPs, which are about Rs 450 billion with ten percent interest added on will also be paid this year which will also reduce payments to the IPPs.
Gauhar maintained that the difference between the agreements signed with the IPPs in 2013 and 2021 is that payments in 2013 were made without pre-audit and no concession was sought. However, this time, IPPs have agreed to give discount of 20-25 per cent which is a big achievement of the incumbent government.
He maintained that the government has reduced by 30-70 percent the rate of return on government’s own existing and in pipeline power plants. The financial impact of this achievement will be seen in the years to come, he claimed adding that the financial burden will be reduced by nearly Rs 6 trillion.
He said by clubbing the financial impact of agreements with IPPs and government owned power plants, electricity prices will be reduced by Rs 1-2 per unit in the next few years.
Copyright Business Recorder, 2021