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ISLAMABAD: Central Power Purchasing Agency–Guaranteed (CPPA-G) has reportedly linked any support for extension in PPA of Kot Addu Power Company (Kapco) with comparative analysis of National Transmission and Despatch Company (NTDC)/ NPCC.

CEO CPPA-G, Rihan Akhtar, conveyed this stance to CEO of KAPCO Aftab Butt in response to the latter’s letter of June 15, 2022, stating that “pursuant to Section 3.4 of the Master Agreement of February 11, 2021 wherein it has been stated under agreement on the terms and conditions and completion of legal and corporate formalities, the power purchaser shall consent to the extension of the PPA for an additional term following the expiry of the term of the PPA.”

CEO CPPA-G has cited reference of a letter of General Manager NPCC (System Operator) of November 20, 2020 wherein it was already stated that Kapco critically requires detailed feasibility study from independent consultant to determine the quantum of generation capacity required in future. Subsequently, Ministry of Energy (Power Division) through its letter of September 27, 2021 required that a comprehensive analysis should be prepared by NTDC and a report duly approved by NTDC Board of Directors be submitted to Ministry for consideration, the response of which is awaited.

In this regard, CPPA through its reminder of June10, 2022 again requested NTDC to provide its analysis and recommendations for renewal/ extension of PPA with Kapco considering its system requirements.

“The exact requirement of the Kapco power plant in the system is to be determined by NTDC on the basis of comprehensive study; however, based on the GM (SO) letter and recent plant utilization, the plant is expected to be utilized to maintain grid system operational requirements in the foreseeable future,” said CEO CPPA-G.

Some banks withdraw credit lines: Kapco expedites efforts for renewal of its PPA

After explaining current status of the matter, CEO CPPA-G has stated that CPPA will proceed further under the terms of Master Agreement for extension/ renewal of PPA, once a comprehensive study along with analysis and recommendations for renewal/ extension of PPA are received from NTDC.

CPPA-G; however, has advised Kapco that it can proceed with filing of its tariff application to NEPRA as per NEPRA’S rules and regulations. Accordingly, NEPRA will decide whether to determine its tariff or otherwise the mode through which plant can participate in the CTBCM.

Earlier, CEO Kot Addu Power Company had stated that some of the lending banks have withdrawn credit lines whereas some have reduced credit lines.

The PPA of June 27, 1996 (as amended from time to time) was entered into at the time of the company’s privatisation in 1996 along with a number of other agreements (facilitation agreement, GoP sovereign guarantee, Gas Supply Agreement (GSA), Oil Supply Agreement (OSA) etc). The term of the PPA is 25 years (and following the settlement of a liquidated damages dispute with the Power Purchaser) is set to expire on October 24, 2022. In accordance with the provisions of the PPA, the company formally notified the Power Purchaser to enter into good faith negotiations for the renewal of the PPA in 2019. However, matters have not progressed due to disruptions caused by the pandemic (COVID-19) in early 2020 and thereafter for other reasons attributable to the power sector of Pakistan.

The government and the power purchaser, while negotiating and agreeing to the terms and conditions, explicitly undertook and stated in the Master Agreement of February 11, 2021, to assist and support the company in getting tax exemption similar to other IPPs after the initial term of the PPA and subject to the completion of legal and corporate formalities, issuance of the consent to the extension of the PPA for an additional term.

According to Kapco, inordinate delay in renewal of the PPA is a matter of grave concern for the company, despite the fact the company is being dispatched at high levels during this period and the power purchaser/ system cannot afford disruption/ stoppage of power generation from the company’s power plant.

Kapco claims that it has continued to fully support the system by providing the necessary required power while accepting higher (negative) late payment charges payable to fuel supplier.

Copyright Business Recorder, 2022

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