AGL 40.01 Decreased By ▼ -0.01 (-0.02%)
AIRLINK 187.98 Increased By ▲ 9.91 (5.57%)
BOP 10.12 Increased By ▲ 0.16 (1.61%)
CNERGY 7.11 Increased By ▲ 0.17 (2.45%)
DCL 10.15 Increased By ▲ 0.06 (0.59%)
DFML 41.57 No Change ▼ 0.00 (0%)
DGKC 107.91 Increased By ▲ 1.02 (0.95%)
FCCL 39.00 Decreased By ▼ -0.03 (-0.08%)
FFBL 82.02 Increased By ▲ 0.13 (0.16%)
FFL 14.90 Increased By ▲ 1.20 (8.76%)
HUBC 119.46 Increased By ▲ 0.21 (0.18%)
HUMNL 14.05 Increased By ▲ 0.05 (0.36%)
KEL 6.40 Increased By ▲ 0.49 (8.29%)
KOSM 8.07 Increased By ▲ 0.01 (0.12%)
MLCF 49.47 Increased By ▲ 1.37 (2.85%)
NBP 73.66 Increased By ▲ 0.83 (1.14%)
OGDC 204.85 Increased By ▲ 11.09 (5.72%)
PAEL 33.56 Increased By ▲ 1.41 (4.39%)
PIBTL 8.07 Increased By ▲ 0.05 (0.62%)
PPL 185.41 Increased By ▲ 11.34 (6.51%)
PRL 33.61 Increased By ▲ 1.01 (3.1%)
PTC 27.39 Increased By ▲ 2.12 (8.39%)
SEARL 119.82 Decreased By ▼ -5.14 (-4.11%)
TELE 9.69 Increased By ▲ 0.27 (2.87%)
TOMCL 35.30 Decreased By ▼ -0.09 (-0.25%)
TPLP 12.25 Increased By ▲ 0.63 (5.42%)
TREET 20.26 Increased By ▲ 1.84 (9.99%)
TRG 60.78 Increased By ▲ 0.29 (0.48%)
UNITY 37.99 Decreased By ▼ -0.22 (-0.58%)
WTL 1.65 Decreased By ▼ -0.01 (-0.6%)
BR100 11,772 Increased By 249.2 (2.16%)
BR30 36,584 Increased By 1034.2 (2.91%)
KSE100 110,810 Increased By 1913.6 (1.76%)
KSE30 34,429 Increased By 620.5 (1.84%)
Print Print 2024-09-01

Owners of some IPPs summoned as probe continues

  • Exercise aims to persuade independent power producers (IPPs) that their support is crucial for the country at this time, according to sources
Published September 1, 2024

ISLAMABAD: As the investigation into Independent Power Producers (IPPs) enters into its final stage, nearly half a dozen owners from these companies have been summoned to Islamabad on Monday (Sept 2) for what is described as courteous questioning and to provide evidence regarding alleged undue profits, sources informed Business Recorder.

The government led by Prime Minister Shahbaz Sharif has opted to employ the same influential-driven methods used by the Imran Khan administration in 2021 to exert pressure on IPPs. Initially, teams from these influential circles visited various plants to gather records and data. Following this, senior IPP executives were called for questioning in different cities and now they are being summoned to Islamabad for further discussions.

The sources said this exercise is meant to convince the owners of IPPs that the country needs their support at this juncture as current level of electricity prices are unbearable for industry and other consumers.

Rs1trn capacity payment made to 26 IPPs in 10 years

IPP owners are being urged to agree to revised contract terms, citing substantial amounts of money received, both legally and otherwise. In the first phase of this process, IPPs established under the 1994, 2002, and 2006 policies have been presented with alleged ‘missing links’ in their documentation and the substantial profits they have garnered. This approach has reportedly unsettled many IPP owners.

Energy sector investors are concerned that the government’s ‘tactics’ will be at the expense of investment. They argue that the handling of capacity payments is “unfortunate,” and this approach could discourage foreign investment for years. Addressing a technical issue with coercion carries risks that undermine investor confidence.

Minister for Power Awais Leghari reported to a parliamentary panel that approximately 50-60 experts are thoroughly reviewing all aspects of the power plant agreements to determine the government’s next steps. The politicization of this issue, which places blame on investors who made critical investments during a time of need, is likely to deter future investments.

Power Division, has also gave an in-camera briefing on current investigation on IPPs to the Senate Standing Committee on Power, in its last meeting of August 6, 2024 but details were not shared with media.

Although Minister Leghari has assured that the government will not unilaterally alter IPP contracts, concerns remain about the use of pressure tactics to compel IPP owners to accept the negotiators’ terms. This issue was highlighted in discussions with leading power sector investors in Pakistan.

A senior executive in the sector remarked, “the issue of capacity charges boils down to Rs. 18 per unit. Out of this Rs. 18, approximately Rs. 12 per unit is allocated to payments for government-sponsored generation units, including RLNG-fired plants, nuclear, hydel, wind, and baggasse-based plants. Of the remaining Rs. 4.60 per unit, approximately Rs. 4.60 is directed to capacity payments for Thar Coal-based and CPEC coal-based plants installed by Chinese investors. The share of IPPs in capacity payments amounts to Rs. 1.39 per unit. Even if all capacity payments to plants under the 1994 policy were removed, the impact would only be Rs. 0.54 per unit, and an additional Rs. 0.85 per unit for the 12 plants under the 2002 policy.”

This analysis suggests that even if the government manages to shut down all IPPs from the 1994 and 2002 policies, the potential savings would be minimal. However, such actions could significantly damage investor confidence and erode trust in policies, making future investments unlikely in a country where sovereign guarantees seem unreliable. Inefficiencies in the transmission and distribution system (T&D losses) and under-recovery by DISCOs are major factors driving up energy costs. During the first half of 2023-24, electricity distribution experienced losses and inefficiencies amounting to Rs. 77 billion, compared to Rs. 62 billion during the same period in 2022-23.

Private sector power generators argue that the government’s push to renegotiate IPP contracts, last updated in 2021, appears to be more about catering to specific interest groups and enhancing the government’s image rather than providing tangible benefits to the public. This approach, they say, could severely damage the country’s reputation as an investment destination.

The government’s team is hopeful that it may succeed in extracting some monetary concessions from the IPPs that it can then claim as a significant success.

Copyright Business Recorder, 2024

Comments

Comments are closed.

Arsalan Sep 01, 2024 03:30am
This is a Lame excuse that by renegotiating or finishing the ipp contracts we will distract foreign investments as the whole world knows that these contracts were evil and its our limitations to delay
thumb_up Recommended (0)
Aam Aadmi Sep 01, 2024 05:20am
This so-called 'probe' will get buried midway. Nothing will come out. IPPs will continue making hay while the sun shines.
thumb_up Recommended (0)
Oaks Sep 01, 2024 08:56am
So this article convinces us of the futility of renegotiating IPP agreements. Doesnt offer any alternative or solution. I guess an IPP owner would have wrritten similar application to Govt.
thumb_up Recommended (0)
KU Sep 01, 2024 11:08am
Nation should not be hopeful in our govt's quest for plunder n pushing country to chaos. Another scandal of expensive LNG import versus affordable local gas will numb our senses in coming days.
thumb_up Recommended (0)
Abid Hussain Sep 01, 2024 11:57am
Forensic audit of all the IPPs should be done at the earliest. On expiry their contacts government should not renew their license . No tax should be levied on solar panels .
thumb_up Recommended (0)
Jawad ur Rehman Sep 01, 2024 02:33pm
All these circumstances Govt decided to reach china and Iran they people give us electricity oil petrol gas in very cheap reduced rate why govt of Pakistan didn't take this wright decision for
thumb_up Recommended (0)
Najam Sep 01, 2024 03:57pm
In my opinion, the foundation of this catastrophic situation was established by the team that negotiated and approved these contracts up front, Raja rentals types.
thumb_up Recommended (0)
Adil Gilani Sep 01, 2024 05:08pm
Govt. taxes more when it should be cutting its own expenses Govt should stop T&d losses at Disco’s but want to re negotiate with IPP’s. Govt owns many IPP’s as well (Kapco, Sindh govt in Coal power)
thumb_up Recommended (0)
Mahmood Sep 01, 2024 05:08pm
Good move, must be taken serious rather casual sit together Looting of Pakistan must be stopped
thumb_up Recommended (0)
Waheed ud din Sep 01, 2024 09:48pm
There is no rationality in paying capac8ty charges to Baghas based IPPS. Although it is denied by some quarters but it appears that capacity payments are made to Baghas based IPPs when gen. Power.
thumb_up Recommended (0)