The federal government has reportedly reached an understanding with three Independent Power Producers (IPPs) to sign interim agreements on payment mechanism similar to the pacts signed by PML (N) government with six IPPs, well informed sources told Business Recorder. Giving the background, the sources said, Altern Energy limited, with capacity of 29 MW was established under Power Policy 1994 Policy, operating on pipeline quality supplied by SNGPL prior to RLNG, on take and pay basis. The existing Power Purchase Agreement (PPA) entitles the company to raise invoices on the first working day of every month, payable by the CPPA-G after 15 days of receipt of such invoice.
M/s Davis Energen Limited (DEL) with capacity of 10.2 MW was established under Power Policy 1994, and the operating agreements (PPA) entitles the company to raise invoices on the first working day of every month, payable by the CPPA-G after 30 days of receipt of such invoice. Kot Addu Power Company Limited (Kapco) with capacity of 1345 MW is operating on LSFO as main fuel due to non-availability of gas; currently on RLNG due to its availability and GoP's preference to run plants more on RLNG because it is cheaper than furnace oil and the higher output attracts lower VO&M. The existing PPA entitles Kapco to raise invoices on the first week day of every month, payable by the CPPA-G after 25 days of receipt of such invoice.
Similarly, the public sector Gencos are also running on RFO and SNGPL is supplying RLNG to these Gencos on as and when available basis. Billing cycle of the Gencos is also based on 20 days. SNGPL has demanded billing cycle of 7+3 days from the IPPs and Gencos (i.e. raising of invoices after every 7 days which will be payable after three days). Since this is not covered under the existing PPAs of these IPPs and Gencos, therefore, the IPPs and Gencos demanded back to back arrangement with CPPA-G to neutralize them against any additional financial implications.
As the revised payment mechanism under the tripartite agreement in not in line with the existing PPAs and GSAs, therefore, in order to enable IPPs and Gencos to make weekly payments to SNGPL for SNGPL supplies, it is imperative that IPPs must also get revenues on weekly basis from CPPA-G against electricity supplies to CPPA-G. The PPAs, however, signed between CCPA-G and the related companies provide a bi-weekly or monthly billing cycle, which is required to be changed and brought on weekly billing cycle to enable all the stakeholders (PSO, SNGPL, SSGC, IPP and Gencos) to ensure timely payments to RLNG suppliers and resultantly ensure continuous supplies of LNG to Pakistan. Any disruption in the timely remittance of payments in the entire chain of payments is likely to jeopardize the uninterrupted supply of LNG to power sector. Since the existing PPA has been approved by the ECC, therefore, any deviation from the PPA also requires approval of the same forum.
According to sources, the parties acknowledge that certain amendments are to be made in the GSA and PPA between the parties. The parties are agreeing to enter into an interim arrangement with an intent to reflect it in the subsequent amendments on the same basis of interim agreement signed with M/s Saif Power, M/s Saphire, M/s Orient Power, M/s Halmore, M/s Rousch Power and M/s Fauji Kabirwala. These agreements were signed after approval from ECC on December 29, 2017. For this purpose, tripartite agreements are required to be signed between SNGPL, CPPA-G and Altern Energy Limited / Davis Energen Limited/ Kot Addu Power Company Limited.
After approval from ECC similar interim arrangements were signed with M/s Rousch and Fauji Kabiwala. The validity of the long-step date of these interim arrangements was June 30, 2018 for the execution of the GSPA and the PPA. This long-stop date is required to be rationalized and linked to the execution of the GSPA and amendment to the PPA. Therefore, validity of the interim agreement of Rousch Power and Fauji Kabirwala may be extended till the execution of the GSPA and the amendment to the PPA.
The sources said tri-partite agreements with AEL, DEL and Kapco have been finalised on the analogy of already signed and executed agreements with the approval of the ECC on June 28, 2016 and December 29, 2017. As directed by ECC on March 27, 2019, audit of exchange rate application in accordance with the provisions of PPAs has been completed and is under review by CPPA-G Board. However, according to the Power Division, exchange rate application audit does not have any bearing on this issue.
The salient features of the draft interim agreements are as follows: (i) AEL, DEL and Kapco shall invoice CPPA-G, the fuel cost component along with GST after 7 days of generation using RLNG for first three weeks of the calendar month, while the fourth invoice shall be raised for the remaining number of days of the month and CPPA-G shall pay such invoices without any deductions; (ii) at the end of each month, the AEL, DEL and Kapco shall submit Energy Purchase Price (EPP) invoices to CPPA-G which shall include fuel cost, variable O&M cost and GST components, deducting the FCC and GST already invoiced to CPPA-G.
These invoices shall be processed as per the terms of the existing PPA; (iii) the rate of delayed payment interest charged by IPPs to CPPA-G shall be one month Kibor +2 per cent for delay in payment from buyer's due date; (iv) AEL, DEL and Kapco shall provide a Standby Letter of Credit to SNGPL on mutually agreed terms.
The related SBLCs shall be maintained during the term of the interim agreement and its amount may be reviewed from time to time; (v) these agreements shall be valid until GSPA/ PPA are amended as contemplated herein; (vi) the validity of the interim agreement of M/s Rousch and Fauji Kabirwala may be extended till the execution of the GSPA and amendment to the PPA; and (vii) Gencos( Genco 1, II and III) shall invoice CPPA-G the fuel cost component along with GST after seven days of generation using RLNG for first three weeks of the calendar month, while the fourth invoice shall be raised for the remaining number of days of the month and CPPA-G shall accept such invoices without any deductions.
At the end of each month, the AEL and DEL and Kapco shall submit EPP invoices to CPPA-G, which shall include, fuel cost, variable O&M cost and GST components, deducting the FCC and GST already invoiced to CPPA-G. These invoices shall be processed as per the terms of the existing PPA.
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