'Side agreements' with IPPs: Qamar calls meeting today to formulate recommendations

Minister for Water and Power, Naveed Qamar, has convened a meeting on Tuesday (today) to formulate recommendations for the Economic Co-ordination Committee (ECC) on the proposed draft "side agreements" with Independent Power Producers (IPPs) on delay in payments, sources close to Managing Director PPIB told Business Recorder.
The sources said, PPIB have held a number of meetings with the stakeholders in the past to address concerns of RFO and gas and High Speed Diesel (HSD) fired IPPs which remain inconclusive.
However, the stakeholders finalised the following recommendations for the ECC for approval: (i) in case of delayed/ non-payment by the NTDC, the IPPs will not suspend their operations due to non-availability of fuel until the quantity of fuel equivalent to 90 days (for RFO based IPPs) or 33 days (for gas / HSD based IPPs) full load operation of the plant, is exhausted; (ii) in case the payments to IPPs are delayed to such an extent that the threshold point is reached, the IPPs will be deemed available, subject to the condition that the plants are available for dispatch at their declared available capacities but are not able to dispatch due to non-availability of fuel, solely caused by non-payment by the power purchaser.
Under such a condition, the IPPs will be eligible to receive capacity payments for such declared available capacity. In lieu, IPPs will neither issue notices for payment in the event of default to the power purchaser, due to delayed/non-payment of energy payments, nor call the GoP guarantee for the same; provided however, that the IPPs right to issue default notices to NTDC under the PPA and make a call on the GoP guarantee for energy payments, shall be restored after the expiry of sixty days; (iii) policy guidelines may be issued by the ECC to Nepra for enhancement of working capital component of the capacity payment for the IPPs to cover (a) the fuel cost at full load as in and (b) adjustment of the working capital component of the capacity payment based on variation in the fuel price on monthly basis in addition to quarterly Kibor indexation already provided in tariff determinations; (iv) subject to approval and implementation of these recommendations, IPPs will not be entitled for delayed payment interest on the delayed energy payments.
However, delayed payment interest and all other remedies will be applicable to delays in capacity payments as per the PPA;(v) Nepra will be required to issue its determinations in relation to (iii) above within 60 days of the ECC decision;(vi) NTDC will pay the deemed capacity payments in the interim; and (vii) these recommendations will be applicable from October 16, 2011 to those IPPs which opt for this mechanism and sign a separate side agreement with the NTDC.
Upon recommencement of regular payments due and payable by the power purchaser, the side agreement will stand superseded by the PPA. However, the deemed availability provisions in the side agreement will survive and be effective from time to time in case the payments to IPPs are delayed to such an extent that the threshold point is reached during such time.
The sources said, when these recommendation were placed before the ECC, in its previous meeting, most of the members opposed the recommendation on the basis of different arguments. "ECC members argued that the recommendations needed detailed analysis before taking any decision," the sources continued.
The ECC, sources said, constituted a committee comprising Minister for Water and Power (convenor), Deputy Chairman Planning Commission, Dr Nadeem ul-Haq, Secretary Finance, Secretary Water and Power to carryout a detailed analysis of the PPIB's recommendations for consideration of the ECC in the forthcoming meeting. "We hope today's meeting will find out the ways to settle the issues of the IPPs," the sources concluded.