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ISLAMABAD: The Federal Government has decided to amend Facilitation Agreement and guarantee of Kot Addu Power Company (Kapco) and withdraw it from Privatisation Commission's portfolio.

Giving the background of proposal, the sources said Cabinet Committee on Energy and Economic Coordination Committee of Cabinet, on September 24, 2020 approved the report of the Implementation Committee (IA) which was mandated to convert the MoUs signed with IPPs into binding agreements. The Cabinet has ratified the decisions of Cabinet Committee on Energy (CCoE) and Economic Coordination Committee (ECC) of Cabinet in their decisions of December 15, 2020 and approved the report along with Master Agreement and Power Purchase Agreement with Kapco, an independent power producer privatized under the applicable privatisation laws but operated outside the typical power generation policy framework for Independent Power Producers (IPPs).

The concession framework for the purposes of privatization was prepared and approved by Privatization Commission and accordingly the Facilitation Agreement and GoP guarantee with Kapco were signed by the Privatization Commission on behalf of the President, at the time of its privatization, on June 27, 1996. For the purposes of execution of the Master Agreement and PPA amendment agreement, in terms of the MoU agreed with Kapco, any amendments in the Facilitation Agreement thereto were to be signed by the Privatization Commission.

On November 26, 2020, Power Division, in a letter communicated this position to the PC however, Privatization Commission, on February 11, 2021 responded that due to certain procedural impediments the proposed amendments could not be prepared and signed by designated official of Privatization Commission and requested that, in respect of Kapco being an IPP, any further agreements or amendments to the Facilitation Agreement and GoP Guarantee should be signed by the Power Division/PPIB.

In order to convert the MoU into legally binding agreements, Managing Director, PPIB on behalf of the President of Pakistan, signed the amendment to the Implementation Agreements and Guarantees for all other IPPs as a package to give effect to scheme of novation of the Power Purchase Agreements from WAPDA/NTDC to CPPA-G. In this instant case WAPDA has signed Third Amendment to the Power Purchase Agreement and Master Agreement with KAPCO whereas a novation agreement has already been signed amongst WAPDA, CPPA-G and KAPCO; however, the effectiveness of such agreements is contingent upon the execution of amendments of the Facilitation Agreement and the Guarantee.

Power Division has proposed that it would, therefore, be expedient that in view of position taken by Privatisation Commission (PC), such amendments to the Facilitation Agreement and guarantee are also executed by the Managing Director PPIB on behalf of the President of Pakistan and portfolio of the project is also entrusted to PPIB. In this regard, Section 5(2)(9) the Private Power & Infrastructure Board Act (VI of 2012) (the PPIB Act), vests power to the Federal Government to entrust any power or function to PPIB to meet the objects of the PPIB Act.

As the Facilitation Agreement and GoP guarantee was approved by Cabinet, any amendments thereto are also required to be approved by the Federal Government along with the authorization of Managing Director PPIB to sign, execute and deliver it.

In the existing scenario, the following proposals may be considered by the government: (i) draft amendment to the Facilitation Agreement and draft amendment to the Guarantee; (ii) the portfolio of the project may be withdrawn from Privatisation Commission and entrusted to PPIB, as one-window facilitator, along with all relevant record in terms of Section 5(2)(q) of Private Power & Infrastructure Board Act (VI of 2012); and (iii) the Managing Director PPIB, or in his absence Director Legal PPIB, may be authorized to sign and execute the amendments to the Facilitation Agreement and the Guarantee on behalf of the President of Pakistan.

Copyright Business Recorder, 2021