ISLAMABAD: The government has altered standardised Security Package Documents (SPDs) of solar projects including duration of indexation to lure investment, well informed sources told Business Recorder.
Power Division, sources said, recently informed the Economic Coordination Committee (ECC) of the Cabinet that the Federal Cabinet on October 18, 2022 had approved several interventions under the Framework Guidelines for Fast-Track Solar PV Initiatives 2022 for fast-track deployment of solar PV, inter alia, substitution of expensive imported fossil fuels with solar PV Energy Initiative.
According to Secretary Power, the Framework Guidelines, at Section 2.1.2 (xi) stated that “(xi) seventy percent of the total tariff will be indexed quarterly -basis with exchange rate variation (USD/PKR). No other indexation will be provided for the term of the project. Further, the Framework Guidelines, at Section 2.1.2 provided that (xvi) in addition to the GoP guarantee, the payment under the EPA would be ensured on the 60 day after invoice through bank debit from the dedicated solar account to be maintained by CPPA-G.”
Power Division further informed that the ECC in its meeting held on November 14, 2022, while approving the standardised Security Package Documents (SPDs) (i.e. Energy Purchase Agreement (EPA) & Implementation Agreement (IA)) for the large scale solar PV projects under the initiatives approved that “(i) the new payment mechanism proposed under the Security Package Agreements for settlement of invoices through bank debit from a dedicated solar account to be maintained by the purchaser be deleted and replaced with the standard payment mechanism given under the earlier ECC approved agreements; and (ii) the tariff would be indexed annually rather than on quarterly basis on rate variation (USD/PKR).”
The decisions of the ECC were subsequently ratified by the federal cabinet.
Power Division stated that based on market response on the approved modifications by the ECC and in order to ensure the viability of the project, Alternative Energy Development Board (AEDB) argued that the changes made in the Standardised Security Package Documents be reverted to the extent of indexation and payment mechanism for making the initiative successful.
The payment mechanism given in the original Standardised Security Package Documents was shared with the ECC.
Power Division submitted following proposals for consideration and approval of the ECC: (i) indexation of tariff in the SPDs be retained on quarterly basis as per Section 2.1.2 (xi) of the Framework Guidelines; and (ii) the proposed payment mechanism for settlement of invoices through bank debit from a dedicated solar account to be maintained by the purchaser be included in the Security Package Agreements as per Section 2.1.2 (xvi) of the Framework Guidelines.
After detailed discussion, the ECC has approved amendments to the SPDs, which will now be placed before the federal cabinet, in its forthcoming meeting.
Copyright Business Recorder, 2023