Independent Power Producers (IPPs) have reportedly rejected recent modifications in transmission licence of National Transmission and Despatch Company (NTDC) as this can affect their Power Purchase Agreements (PPAs) and Implementation Agreements (IAs). Well informed sources told Business Recorder that almost all the IPPs operating under different power policies have shown serious reservations on the issuance of Licence Proposed Modification (LPM) stating that the approval of LPM by Nepra has prejudiced their rights and obligations under the existing PPAs and Implementation Agreements (IAs).
The sources said government has bifurcated functions of NTDC and Central Power Purchasing Agency- Guaranteed (CCPA-G) on the recommendations of the IMF, World Bank, ADB and JICA as part of power sector reforms. Nepra will hold a public hearing on Wednesday (today) to hear the viewpoints of IPPs to incorporate in LMPs. According to Adil Khattak, Chief Executive Officer, Attok Gen. Limited, the two-week review petition opportunity afforded to IPPs is premised upon the assumption that recourse/ relief in the matter would, or even could, be available through mere review of LPM.
He maintained that such an assumption is erroneous since the LPM does not exist in a vacuum. It is inextricably linked with and dependent upon a projected radical disruption of the fundamental paradigm upon which rests the delicate balance of pertinent sectoral relationship- which delicate balance is destroyed by deconstruction of that paradigm.
Some salient features are: several inconsistencies with the PPA/ sovereign guarantee regime which can readily be identified to Nepra's staff in consultative session, and the fact that the contractual power purchaser ie NTDC is purportedly extinguished, while its successor (CPPA-G) has yet to be contractually installed which implies modification is creating a contractual and legal hiatus.
He further stated that it is critical that until appropriate and adequate novation of the PPAs, there is no contractual power purchase for purposes of the PPAs. Consequently, as an interim measure, the previously existing system (with the previous power purchaser) must be allowed to continue until the new paradigm is satisfactorily established without flaw, inconsistencies and incompatibilities.
Nishat Power, in its letter stated that the obligations of the power purchaser are secured by a sovereign guarantee. According to the company, it would be a matter of concern for the company in case any change whatsoever is made to the PPA and IA without the consent of the company. Accordingly, with respect to the subject matter, it is critical that NTDC, at all times, must continue to have the power and authority under its licence to fulfill all its obligations towards the company under and in terms of the PPA (or the entire term of the PPA). The company continues to treat NTDC as its counter party to the PPA for all intents and purposes. In this regard, the company has brought on that to-date the company has had no discussions or communication with any third party in relation to performance of NTDC's obligations under the PPA. The company is also not aware of arrangement, if any, that NTDC may have with any third party in this regard. In any event, it may be noted that no such arrangement would apply insofar as the Company is concerned unless the same is shared with and consented to by the Company.
The LPM proposed by NTDC to its transmission licence was submitted to NEPRA on May 6, 2015. IPPs have noted that power to enter into documents pertaining to the procurement of electrical power is being removed from NTDC's transmission licence and a more limited scope of NTDC has been proposed.
NTDC can now only "transfer or novate" the PPAs with the IPPs. However, has this Novation Agreement been discussed with all IPPs? It needs to be considered whether all the IPPs would be satisfied with this arrangement. IPPs have shown their willingness to give ample time to review the draft transfer/ novation agreement and ascertain if the key concerns of the company are adequately catered for. This is important because it needs to be considered if IPPs do not sign the Novation Agreement; and IPPs are unsure if NTDC has already transferred the managements of the billing and settlement functions pursuant to the Business Transfer Agreement (BTA).
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