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ISLAMABAD: The federal government is likely to pay 40 per cent agreed amount to the Independent Power Producers (IPPs) established under pre-1994 policy and 1994 policy within a few days, which according to the IPPs of the Power Policy 2002, will be discriminatory and may attract litigation.

Power Division summary to the Economic Coordination Committee (ECC) not yet tabled: (i) does not recommend payments be made as agreed till after the settlement of the National Accountability Bureau (NAB) investigation against over a dozen Independent Power Producers (IPPs) established under the Power Generation Policy 2002; there is a strong impression that if Power Division suggests to the ECC to withhold payment to IPPs of policy 2002, until NAB completes its investigation, then ECC would certainly stop payment; and (ii) IPPs which were established under the Power Generation Policy 1994 or before 1994 Policy, should be paid their 40 per cent agreed amount.

According to the contracts, the Federal Government pledged to pay 40 per cent - Rs 400 billion - to the IPPs no later than 30 working days starting from February 11, 2021. After excluding, holidays, the exact date of payment to IPPs is March 24, 2021, which is next Monday.

The sources said Babar Yaqoob Fateh Muhammad, Chairman of government's negotiating committee has also approached Power Division and sought reasons for the delay in payment to the IPPs and justification for sending the summary to the ECC. He asked Secretary Power Division, Ali Raza Bhutta, to advise Secretary Finance to at least clear payments of IPPs of pre 1994 Policy and 1994 Policy.

Power Division has submitted its file to the Finance Division, which is expected to clear 40 percent agreed payments of IPPs established under the pre-1994 Generation Policy and the 1994 Generation Policy in a couple of days.

Some of the IPPs have approached the concerned authorities, requesting them to intervene in the matter immediately and stop Power Division from tabling its summary before the ECC, which could certainly result in stalling payment to all the IPPs.

The IPPs established under pre 1994 Policy and 1994 Policy also approached the government to at least clear their payments instead of waiting for the last day of the agreed date.

The sources said concerned officials in Finance Division argue that they have completed their paperwork and are just waiting for ‘green signal’ from Power Division.

IPPs are of the view that if the agreed 40 per cent amount is not paid, they will not be able to ensure fuel stocks.

"If the government has issues in making payments as per the revised agreements, then it should release regular payment so that IPPs can maintain their stocks," said a representative of the IPPs.

Another IPP representative stated: "If the government backs out from its commitment despite signing of revised agreements, it will send a negative signal to the foreign investors at a time when FDI is already on the decline."

According to him, NAB was taken into confidence on the revised agreements and even its representative participated in the ECC meeting when approval of agreements was granted.

"Now there is no justification for withholding agreed amounts of the IPPs established under the Power Generation Policy 2002," he maintained.

Payment is an integral part of revised agreements, and if the government delays payment, the agreement will become null and void, he contended.

"If the government pays 40 per cent to some IPPs and not to all as per the agreements, it will be a case of discrimination, the deprived companies will have the right to approach for international arbitration," he added.

Power Division, in its summary, had sought approval of the ECC to withhold payments to IPPs established under the Generation Policy 2002 until a clear chit is received from the anti-graft body.

Cabinet Committee on Energy (CCE) and ECC considered the report by Implementation Committee, mandated to convert 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 the 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, the first instalment of outstanding payables of IPPs is to be paid within 30 days of signing of the agreement with the IPPs under the pre-Nepra regime and after tariff determination for IPPs under 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 of power sector audit, circular debt resolution, and future roadmap. Subsequently, 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 the signing of an arbitration submission agreement with the IPPs. The draft arbitration submission agreement has been agreed and initiated 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 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.

Power Division argues thar since NAB is conducting investigations into the issue of excess profitability and this matter relates to IPPs of Power Policy 2002, it would be appropriate to wait for the conclusion of NAB investigations before proceeding further with payments to these IPPs.

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

Power Division, in its summary 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 agreement, 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 summary was on the agenda of two previous ECC meetings but inexplicably dropped from the agenda discussed on March 17, 2021.

Copyright Business Recorder, 2021


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