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ISLAMABAD: Power Division’s team led by Minister for Power, Sardar Awais Ahmad Khan Leghari is to give a detailed briefing on the country’s under-performing power sector, including update on revision on IPPs contracts and ongoing negotiations to the visiting team of International Monetary Fund (IMF) on Friday (Nov 15), well-informed sources told Business Recorder.

The Task Force on Energy, comprising Minister for Power, Special Assistant to the Prime Minister on Power, Muhammad Ali and Lt. General, Muhammad Zafar Iqbal, Chairman NEPRA, CEO CPPA-G and others, have succeeded in premature termination of contracts with five IPPs and signed revised arrangements with eight baggasse-fired IPPs including the Prime Minister’s son.

The government has projected saving of Rs 412 billion from remaining period of five IPPs, ie, HUBCO, Lalpir, Saba Power, Rousch Power, and Atlas Power, already approved by the federal cabinet whereas saving from revised arrangements with eight baggasse- based IPPs is projected to be Rs 80-100 billion which are yet to be cleared by the cabinet.

DFIs having interests in IPPs move Nepra

The Task Force is now after 18 IPPs set up under 1994 and 2002 policies, of which three IPPs i.e. Engro Powergen (Gas), Sapphire Power, (Gas) and Fauji Kabirwala have also partially initialed the revised pacts with the Task Force. However, some IPPs are still resisting and not ready to pay the extra profit of Rs 55 billion.

The earlier report on IPPs had detected overpayment of Rs 55 billion, the sources said, adding that those IPPs who made less extra profits are ready to return that amount but those that made huge profits are making hue and cry and are still resisting. Next week will be crucial in this regard, the sources continued. The next round will be with Government Power Plants (GPPs) and then wind and solar projects will be invited for revision.

The government has projected Rs 200-300 billion annual savings through negotiated deals. However, re-profiling of debts of Chinese IPPs for five to ten years could further reduce tariff by Rs 3.25 per unit, which implies total reduction in tariff is expected to be around Rs 6 per unit.

Pakistani authorities have already given commitment to the Fund that in FY25, they will settle up to Rs 263 billion earmarked for IPPs and GPPs with revised PPA terms using the established contract structure (10-year floating-rate PIBs and 5-year Sukuks in equal parts, or a more efficient financial instrument). We will also strive to reduce capacity payments as we pay arrears, either by renegotiating PPAs with a new strategy, including by lengthening the duration of bank loans, depending on adequate budget space and Circular Debt Management Plan (CDMP) implementation progress.

The sources said that Power Division has fulfilled all the commitments made with Fund including timely notification of rebasing, Fuel Charges Adjustments (FCAs) and Quarterly Tariff Adjustments (QTAs). Circular debt is not only within the limits agreed with the Fund but over achieved. Currently, circular debt stands at Rs 2.6 trillion and is expected to be reduced as Finance Division starts releasing the amount under TDS claims and subsidy.

According to sources losses are also within the limits, however, NEPRA is not satisfied with the performance of Discos and is initiating legal action against the DISCOs who contributed to the circular debt of Rs 276 billion in terms of increase in Transmission and Distribution (T&D) losses.

Power Division’s team will also brief the IMF team on the proposed privatisation plan of Discos which is under progress under the guidelines of World Bank.

The sources said, Power Division will share ongoing reforms in power sector, including bifurcation of National Transmission and Despatch Company (NTDC) into three entities, installation of AMI meters to reduce losses, new professional Boards in Discos and other entities.

Copyright Business Recorder, 2024

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