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ISLAMABAD: The federal government is reportedly in a serious dilemma on payment of Rs 400 billion to 47 Independent Power Producers (IPPs) as National Accountability Bureau (NAB) has indicated it may take some IPP cases to accountability court, well-informed sources in Finance Division told Business Recorder.

"Power Division and Finance Division have refused to pay a single penny to IPPs until a clear chit is received from the anti-graft body. No official is ready to give the go ahead on payments agreed with the IPPs," the sources continued.

Last week, the Government's Negotiation Team comprised Secretary Power Ali Raza Bhutta and ISI officials held a meeting with the Chairman NAB during which the performance of the Committee was appreciated. A press release was issued by the NAB in this regard.

The sources said, the Cabinet Committee on Energy (CCE) and ECC considered the report by Implementation Committee, mandated to convert the MoUs into binding agreements, and approved the payment mechanism and agreements with IPPs in meetings held on February 8, 2021. Interestingly, an official of NAB also attended the ECC meeting in which agreements with IPPs were approved. The decisions were ratified by the Cabinet on February 9, 2021.

Pursuant to the Cabinet's approval, agreements with 30 IPPs have been signed on 11, 12 and 16 February 2021. Minister for Energy Omar Ayub and SAPM on Power, Tabish Gauhar gave a detailed perspective of government on the deals signed with the IPPs and its financial impact on tariff in the years to come.

As per the payment mechanism included in the agreements, first instalment of outstanding payables of IPPs is to be paid within 30 days of signing of the agreement for IPP under pre-Nepra regime and after tariff determination for IPPs under the Nepra regime. Tariff adjustment application for the IPPs under the Nepra regime is to be filed within five days of signing the agreements.

According to sources, the issue of excess profitability of the 2002 Power Policy IPPs has been highlighted through the report of the Committee for power sector audit, circular debt resolution, and future roadmap. Subsequently, the Committee for Negotiations with Independent Power Producers notified on June 3, 2020, signed MoUs with the IPPs containing the following clause:

"In order to assess if IPPs have made any excess profits, the reconciled numbers between the Committee and the IPPs shall be submitted to Nepra. As a legal body vested with the authority for tariffs, Nepra shall hear and decide this matter in accordance with the 2002 Power policy, tariff determinations and PPAs and provide for a mechanism for recoveries, where applicable."

The Implementation Committee recommended signing of an Arbitration Submission Agreement with the IPPs. The draft Arbitration Submission Agreement has been agreed and initialed between GoP and 12 IPPs under the Power Policy 2002.

The sources further stated that NAB has stated that the Bureau is conducting investigation on the allegations of corruption and corrupt practices against owners/management of Nishat Chunian Power Limited (one of the Power Policy 2002 IPPs), officers/officials of Nepra and officers/officials of CPPA-G and others.

NAB has asked for provision of record and present status of MoU/agreement signed and final negotiations between IPPs and GoP under section 19 of National Accountability Ordinance 1999. Accordingly, the relevant record has been provided to NAB Lahore.

"Since NAB is apparently conducting investigations into the issue of excess profitability and this matter relates to IPPs of the Power Policy 2002, it would be appropriate to wait for the conclusion of NAB investigations before proceeding further with payments to these IPPs," the sources quoted both Power Division and Finance Division as saying.

NAB maintains that the matter has been converted by NAB from an Inquiry in 2019 to an investigation in 2021.

“Power Division has proposed that payments to all Power Policy 2002 IPPs, which have signed Agreements pursuant to MoUs, may be withheld till the conclusion of NAB investigation; payments to all other IPPs may proceed according to the signed agreements,” the sources continued.

Power Division has also proposed that the process of signing Arbitration Submission Agreements with IPPs under the 2002 Power Policy may be held in abeyance till the conclusion of NAB investigation.

"One view is that since NAB has been provided record of all 47 IPPs to let it complete its investigation,” the sources maintained. The thinking is that it is better the matter be resolved forever instead of facing the possibility of NAB starting an inquiry after six months or one year.

Copyright Business Recorder, 2021