ISLAMABAD: The federal government has secured written confirmation from the Independent Power Producers (IPPs) stating that they voluntarily signed the Power Purchase Agreements (PPAs) and Implementation Agreements (IAs), without any duress, coercion, or intimidation.
This information was disclosed in documents submitted jointly by the Central Power Purchasing Agency – Guaranteed (CPPA-G) and seven IPPs to the National Electric Power Regulatory Authority (Nepra) as part of their applications for tariff reductions.
The government has paid Rs 53 billion to seven IPPs against the revised agreements. Liberty Power was paid Rs 5.272 billion, Narowal Energy, Rs 9.680 billion, Nishat Chunian Rs 6.674 billion, Nishat Power Rs 9.633 billion, Engro Powergen Qadirpur Rs 8.041 billion, Saif Power Rs 6.490 billion and Sahpir Electric Rs 7.050 billion.
7 IPPs file joint plea for tariff cut
Providing background on the agreements with seven IPPs under the 2002 policy, CPPA-G stated that, in an effort to reduce consumer tariffs and ease the financial burden on the general public, both the company and the power purchasers have mutually agreed to enter into an Amendment Agreement. This agreement includes adopting a “Hybrid Take & Pay” model, which is now being submitted for approval by the Authority.
According to the agreements, both parties entered into the contracts voluntarily, with free consent, and without any form of duress, coercion, or intimidation, for the amendment of the existing PPAs and IAs.
The following IPPs have filed applications for reduction in tariffs as per agreements with the government’s task force headed by Minister for Power, Sardar Awais Leghari: (i) Nishat Chunian Power Limited; (ii) Nishat Power Limited;(iii) Narowal Energy Limited; (iv) Liberty Power Tech Limited; (v) Engro Powergen Qadirpur Limited; (vi) Saphire Electric Power Limited; and (vii) Saif Power Limited.
The Parties have agreed to amend the Existing PPA and/or the existing IA as of the effective date.
The Parties have agreed to the following terms and conditions which shall be incorporated in the “amended PPA” and the “amended IA”: (i) the Parties agree to implement a ‘Hybrid Take-and-Pay Model’, whereby tariff payment to the Company shall be made by the Power Purchaser as provided hereunder;(ii) The Parties agree that the indexation factors or adjustment factors as provided in this Agreement for the respective components shall be applicable hereinafter for any payment in connection with the Amended PPA; (iii) subject to section 2.2(b)(iv)-(v), the ‘Operation & Maintenance Components’ as determined by Nepra (for the quarter ended 30th September 2024) shall continue; (iv) the quarterly indexation for local Fixed O&M and local Variable O&M shall be the lower of (a) five percent (5%) per annum or (b) the actual average National Consumer Price Index (NCPI) for the preceding twelve months; (v) for each year (starting from 1 October), the current indexation mechanism of Nepra shall continue for Foreign Fixed O&M and Foreign Variable O&M, provided that the PKR/USD depreciation shall be allowed only to the extent of 70% of the actual depreciation per annum. In case the PKR appreciates against the USD in a year, the 100% of such appreciation shall be passed on to the consumers. For clarification, the indices used in the quarterly indexation determined by NEPRA for the period July-Sep. 2024 shall prevail; (vi) Sales Tax, currently included in the existing Cost of Working Capital 1 Component (the “CWC”) shall be removed, and the current spread above KIBOR of 2% has been revised as 1%.
The revised Working Capital Components in future shall be indexed at KIBOR 1% on a quarterly basis ;(vii) foreign component of RoE and RoEDC as determined by NEPRA for the Oct-Dec 2024 quarter shall be recomputed based on 17% rate of return, at the fixed exchange rate of Rs 168/USD. Thereafter, there shall be no exchange rate indexation ;( viii) from the effective date, prorated for remaining period of the current Agreement year, and thereafter for every Agreement year, the Company will be entitled to thirty-five percent (35%) of revised RoE and RoEDC components of tariff as part of CPP, which will be computed as per the terms of the Existing PPA. From the Effective Date, in case the Dispatched and Delivered Net Electrical Output (the “NEO”) of the Company exceeds 35 percent (35%) of the total Contract Capacity in terms of kWh, then Company will be entitled to receive RoE and RoEDC components of tariff, which shall be calculated on the actual NEO exceeding thirty-five percent (35%) of the total Contract Capacity in terms of kWh and the Company shall claim the differential CPP accordingly; ix) Forced Outage or Partial Forced Outage and Scheduled Outage and other allowances shall remain the same as per Existing PPA. Subsequent to the current Agreement Year and from the Effective Date, the Period Weighting Factor shall be unity (ie, factor one (1)); (x) The RoE and RoEDC shall not be accounted for in preparation of ’Economic Merit Order; (xi) from the subsequent Agreement Year, i.e. 30th April 2025, the Parties agree that the Insurance Component of CPP shall be revised such that it should be paid in actual subject to a maximum limit to be capped at 0.9% of allowed EPC Cost as per existing mechanism ;( xii) The company waives, abandons and relinquishes all rights and claims it may have with respect to late payment interest as on October 31, 2024. For clarity, it includes the late payment interest claims that will arise on payments made up to 31st October 2024.
The GoP shall facilitate to waive, abandon and relinquish LPS (the late payment interest claims of SNGPL), back to back, with SNGPL and in the event of failure, the Power Purchaser shall pay to the Company only the LPS amount payable by the Company to SNGPL; (xiii) The Delayed Payment Rate on the Existing PPA shall be KIBOR + 1% (prevailing on the due date of the invoice) per annum on any amount payable in Rupees against Principal Invoices calculated for the actual number of days for which the relevant amount remains unpaid on the basis of 365 days year, without compounding, with effect from the Effective Date.
The GoP will try to facilitate the same arrangement between SNGPL and the company; (xiv) the Power Purchaser shall pay different amounts to different IPPs, (which includes invoices pertaining to the month of October 2024 which will be subject to verification by the Power Purchaser) within ninety days of approval of this Agreement by the Cabinet, which shall be the full and final settlement of past payables and claims of the Parties, arising up to October 31, 2024. For avoidance of doubt this settlement of payables does not include settlement of any Pass-Through items not invoiced in the past.
The GoP has agreed to unconditionally and irrevocably withdraw and extinguish all claims against the Company, referred to under the Arbitration Submission Agreement (ASA).
Copyright Business Recorder, 2025
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