ISLAMABAD: The Finance Ministry has asked the Power Division to coordinate with its Debt Wing for issuance of PIBs and Sukuks against second tranche under 2002 power policy as per approved mechanism for settlement with IPPs, well-informed sources told Business Recorder.
The government has to pay second tranche of 60 percent of total amount of Rs 95 billion to 11 IPPs as per the agreements before July 6, 2022.
Of Rs 95 billion, 1/3rd is payable in cash, 1/3rd in Sukuk and 1/3rd in PIB bonds.
On January 6, 2022, the government paid the first tranche of 40 percent of the agreed amount - 1/3rd in cash, 1/3rd in Sukuk and 1/3rd in PIB bonds - to the following IPPs: (i) Atlas Power - RFO; (ii) Attock Gen- RFO; (iii) Engro Energy-gas; (iv) Saif Power - RLNG; (v) Halmore Power- RLNG; (vi) Hub Power (Narowal) – RFO; (vii) Liberty Power - RFO; (viii) Nishat Power - RFO; (ix) Orient Power - RLNG; (x) Foundation Power (Dharaki) - gas; and (xi) Sapphire Electric – RLNG.
IPPs had received 1 for the first tranche of 40 percent.
IPPs reduced tariff is applicable from the date of payment, in addition to stoppage of increase in late payment charges on undisputed payables which will lead to a reduction in circular debt, heat rate test will be conducted as these IPPs agreed that the government can determine heat rate test to find out actual efficiency of plants which will further reduce tariffs after the tests, and fuel saving will be shared with the government besides reduction in operation and maintenance cost varying between 15 and 20 percent. Approximately, Rs 180 billion plus will be the saving of government through these revised contracts.
Initially, the government had approved payment of Rs 52.4 billion as 40 per cent of total agreed amount to 11 IPPs of Power Policy 2002.
However, later on the government also approved payment to Nishat Chunian. However, Rs 8.36 billion of Nishat Chunian has been withheld till the final award by the Arbitrator. Nepra maintained that it was quite premature to assume that IPPs under the 2002 Policy secured illegal gains as it (Nepra) has yet to make the determination.
The Power Division argued that agreements with the 2002 Policy IPPs, finalized by the Implementation Committee, do not provide for deduction of an “illegal” gain made by an IPP and the agreements already inked will need to be reviewed.
In order to review the agreements, the same process needs to followed, which was followed for earlier approval i.e. negotiation by the Implementation Committee with the IPPs and approval by CCoE before referring the matter to ECC of the Cabinet.
The revised contracts with all the IPPs have projected savings of approximately Rs.836 billion for the remaining terms of the contracts.
According to industry sources, initially, the government had promised to pay 60 per cent of agreed amount as second tranche before June 30, 2022 but now the latter argues that if payment is made during the current fiscal year it will widen the budget deficit and there are indications that the amount will be paid during the first week of July 2022.
“If the government does not honour the agreement, certainly, it will default on the pact,” said one of the representatives of IPPs.
Copyright Business Recorder, 2022