ISLAMABAD: The fear of National Accountability Bureau (NAB) has reportedly made the IPPs' Implementation Committee (IC) headed by the Finance Minister, "inoperative" and a cause of embarrassment for those "quarters" that facilitated negotiations between the government and power companies on Power Purchase Agreements (PPAs), well- informed sources told Business Recorder.
The IA, sources said, held a meeting on July 30, 2021, with Finance Minister, Shaukat Tarin in the chair and discussed different options to honour the agreements signed with 12 IPPs' of the 2002 Policy keeping in view a letter of National Accountability Bureau (NAB) of June 30, 2021.
According to sources, Minister for Law and Justice, Dr.Farogh Nasim, who was on a video link from Karachi, suggested that Secretary Power Division, Ali Raza Bhutta, should brief him on the issue for an informed decision.
NAB, in its letter has clarified that while conducting investigation against M/s Nishat Chunian Power Ltd, illegal gain of Rs 8.36 billion has been established in determination of tariff on the higher side.
The anti-graft agency argues that if the Power Division so desires it may proceed subject to all legal exceptions with the revised agreements, duly vetted by the Ministry of Law and Justice, with the IPPs under the 2002 Policy, after securing the amount of loss caused to the State, as established during the NAB investigation in the best interest of the state.
However, Nepra has argued that it is quite premature to assume that IPPs under the 2002 Policy secured illegal gains as it was yet to be determined by it.
"Nepra claims that it has not yet determined this aspect viz-a-viz the tariff applicable to the 2020 Policy as the matter is subjudice due to stay granted by the Islamabad High Court (IHC)," the sources continued.
Finance Minister, Shuakat Tarin argued that the letter from NAB on the issue is clear. He has suggested that various options could be considered for payment to IPPs after deducting the disputed amounts, as may be determined.
The sources maintained that on payment of first installation of outstanding undisputed payables to IPPs as per revised contracts, revised terms will be effective and the Government will save billions of rupees every year in generation cost.
The major revised terms include rupee based return for local investors instead of $ based, foreign investors return reduced to 12% instead of 15%, share in all future savings of fuel and operation maintenance costs, reduction in interest rate from KIBOR + 4.5% to KIBOR + 2% for first 60 days and resolution of past excess payments of approximately Rs 56 billion against 2002 Power Policy IPPs through Arbitration Panel whose decision will be binding for both the parties without going for further appeal in foreign /local courts.
Moreover heat rate test will also be conducted as per revised contracts to check actual efficiency of these plants.
Insiders in Power Division argue that higher tariffs are being paid to these IPPs regularly since signing of revised contracts and the Government has failed to obtain the benefits extracted out of these IPPs through revised contracts as payment of first installation of undisputed payables has not been made as promised.
"Payables are increasing daily due to indecisiveness, hidden vested interests, as the government has also to pay late payment surcharge in addition to regular payment of higher tariff to the IPPs of 2002," said one energy sector expert.
The IPPs of the 2002 policy can charge maximum rate on account of deferral of payment of first installation despite determination of revised tariffs by Nepra.
One of the representatives of IPPs told this newspaper that they are inquiring of an update on implementation of agreements from those quarters which brought both the government and IPPs on negotiation table.
In April, 2021, IPPs wrote a letter to the Government, saying that "flexibility both on form and substance of the deal was duly acknowledged by the State institutions. There were many aspects of the agreement that the IPPs wanted to structure differently but they consented to what was being insisted by the "State institutions" solely on the promise and the representation that the State of Pakistan was seeking to restart the relationship with the private sector afresh on a clean slate."
IPPs argue that in spite of the GoP agreeing to the terms and conditions, there is reluctance on the GoP's part in fulfilling its obligations, which is surprising as the parties had extensive discussions and it was only after assurances that the IPPs agreed to enter into the present arrangement. Therefore, GoP /State agencies/institutions should fulfill their part of the bargain and ensure that the matter is proceeded with without hurdles or unnecessary delays.
Copyright Business Recorder, 2021