ISLAMABAD: Private Power and Infrastructure Board (PPIB) is reportedly unhappy at the government’s decision regarding withdrawal of available tax exemptions to Independent Power Producers (IPPs).
This was the crux of a letter written by Managing Director, PPIB, Shah Jahan Mirza, to Secretary Finance, Secretary Power and Chairman Federal Board of Revenue (FBR).
MD PPIB has received “displeasure” letters from Hubco, Azad Pattan Power Private Limited, Kohal Hydropower Company (Private Limited) and KOAK Power Limited, a Korean Company. The grievances of IPPs have also been shared with SAPM on CPEC, Khalid Mansoor who is now making an effort to attract investment in CPEC phase-II.
“Withdrawal of income tax exemption for such IPPs which are yet to be issued Letter of Support (LoS) will also shake the confidence on the investment climate of Pakistan for shareholders/investors who made investment decisions considering the tax concessions available under various policies,” Mirza said, adding that such major change might jeopardize much needed investment particularly for meeting challenging targets of renewable energy generation.
Exemptions were available to IPPs through various Power Generation, 2002, 2015, and Transmission Line 2015 Policies (PGPTs), duly approved by the concerned forums i.e. Council of Common Interests (CCI) and Economic Coordination Committee (ECC) of the Cabinet. KOAK Power Limited is the owner and developer of the two hydropower projects i.e. 215 Asrit Kedam hydropower project and 238 MW Kalam Asrit hydropower project in Khyber-Pakhtunkhwa (KP). KOAK Power Limited is the subsidiary of Government of Korea-owned “Korea South-East Power Company” (KOEN), which owns and maintains about 10,000MW generation capacity worldwide with an asset base of around $10 billion. KOEN started its investment in Pakistan back in 2012 and has successfully delivered 102MW Gulpur Hydropower Project which started its operation in 2020.
Owing to the success of Gulpur Hydropower Project, the KOEN decided to expand its portfolio in Pakistan and has planned to raise the investment to $1 billion. In this respect, KOEN was awarded the 215MW Asrit-Kedam Hydropower Project and the 238MW Kalam Asrit Hydropower Project.
According to the company, back in 2020, it came to its notice that an amendment has been incorporated in the Income Tax Ordinance 2001 whereby the income tax exemption available to power projects shall be withdrawn with effect from June 30, 2021 except for those projects which will have valid Letter of Intent (LoI) from Federal or Provincial governments. KOEN made huge efforts and compromised on certain incentives to receive the LoI before the deadline of June 30, 2021 to keep intact this important exemption.
Following the issuance of Lols for the projects, the KOEN invested significant amount of money in Pakistan and decided to move forward.
However, to the company’s utter surprise and shock that income tax exemption will now only be available to those power projects which have valid Letter of Support (LoS) as of June 30, 2021.
“This change in law has been taken very negatively by our management specifically and Korean Government in general as it has directly affected the viability and feasibility of the project,” said CEO, KOAK Power Limited, Yoon An Sang in a letter to federal government.
He further contended that had the company been informed about the amendment back in 2020, the KOEN would not have decided to move forward with these projects as it would have made its tariff highly uncompetitive with other projects especially in the context of newly announced Indicative Generation Capacity Expansion Plan (IGCEP).
“We are now in a situation where we are stuck in the middle of highly unpredictable situation with this change in the goal post. We are not only concerned about the wastage of our investment but also the loss of employment of about 30 Pakistani competent and young employees who have already been hired to develop this project,” said CEO KOAK.
The other power sector companies have also expressed displeasure at the withdrawal of available concession in Income Tax and other taxes under the announced policies.
Copyright Business Recorder, 2022