ISLAMABAD: The Central Power Purchasing Agency- Guaranteed (CPPA-G) is to pay Rs 89.5 billion to the Oil and Gas Development Company (OGDCL) on behalf of Uch Power Limited and Uch Power-II from the circular debt financing facility, as a lump sum arrangement instead of 18 equal monthly instalments, sources told Business Recorder.
This is part of the plan approved by the ECC on a Power Division summary titled “rationalisation of LPI and potential reduction for Nuclear Power Plants (NPPs), Chashma-1, Chashma-2, Chashma-3, Chashma-4, K-2, and K-3,”. Sharing the details, sources said that a Task Force on implementing structural reforms in the power sector was established by the Prime Minister on August 4, 2024, to identify and oversee the implementation of structural reforms in the power sector of Pakistan. Accordingly, the Task Force conducted a detailed analysis of the potential tariff reductions for the Nuclear Power Plants (NPPs) to benefit the consumers of electricity.
The Task Force, after various rounds of discussion, finalised Memoranda of Understanding (MoUs) with NPPs to rationalise the existing tariff. A tariff reduction mechanism was mutually agreed upon following: (i) power purchaser shall pay outstanding balance, as was on December 31, 2024, of Rs 316.937 billion;(ii) Pakistan Atomic Energy Commission (PAEC) agrees to waive, abandon/relinquish all rights and claims of late payment interest as on December 31, 2024 ;(iii) with effect from January 01, 2025, PAEC agrees that the Delayed Payment Rate under the PPA shall be three month KIBOR +1 percent per annum on any amount payable in Rupees against overdue 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; and (iv) as part of these negotiations, the Task Force has agreed upon facilitation measures to be provided by the GoP.
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The sources said, an amount of Rs 614.92 billion was disbursed to the Government Power Producers (GPPs), including Nuclear Power Plants. As of July 31, 2025, the outstanding liabilities towards GPPs stood at Rs. 150 billion. Subsequent payments to the GPPs will be met from the funds available under the circular debt financing facility.
The CPPA-G was authorised to utilise part of the proceeds from the CD financing facility to retire the outstanding debt obligations of Rs 683.253 billion of Power Holding Limited (PHL). At the time of consideration of the summary by the Cabinet, it was anticipated that the CD financing facility would be signed before July 2025, and the proceeds would accordingly be utilised for the said PHL loan retirement.
Therefore, Rs 24 billion allocated in Finance Division Demand No. 45 were surrendered in Power Division demand No. 33 for payment to GPPs through TSG. However, one of the loan amounting to Rs 23.607 billion was retiring in July 2025, and the same was paid out of the Power Division demand No. 33 to avoid default.
The sources said the Task Force has negotiated the waiver of Late Payment Interest (LPI) from three GPPs, namely NPPMCL-Haveli Bahadur Shah, NPPMCL-Balloki and Quaid-e-Azam Thermal Power up to and including December 31, 2024.
The relevant clause in the said negotiated settlement agreements with the GPPs is as follows “the Company agrees to waive, abandon and relinquish rights and claims it may have with respect to late payment interest. For clarity, it includes the late payment interest claims that will arise on payments made up to 31st December 2024”.In accordance with this clause, the total amount of the LPI waiver includes all interest accrued on the outstanding balances with CPPA-G up to and including December 31, 2024.
Consequently, Clause (1) of the Cabinet’s decision of March 19, 2025, regarding the LPI waiver, shall be revised to reflect an updated amount of Rs. 119.53 billion, in place of the previously stated Rs. 87.58 billion.
The Federal Cabinet, in its decision, approved the waiver of LPI amounting to Rs. 54 billion by Oil and Gas Development Company Limited (OGDCL) in respect of Uch Power Limited (UPL) and Uch-II Power Limited (UPL-II) up to December 31, 2024. It was further approved that the outstanding principal of Rs. 89.5 billion, as of December 31, 2024, would be paid by CPPA-G through UPL and UPL-II in 18 equal monthly instalments.
Considering OGDCL’s liquidity constraints, agreement to waive LPIs and the availability of a Rs 1,275 billion CD financing facility, the Task Force recommends disbursement of Rs 89.5 billion (principal component) to OGDCL through UPL and UPL-II as a lump sum, instead of the previously approved 18 monthly instalments. CPPA has confirmed that as of 22nd October 2025, 10 monthly instalments stand paid.
The Federal Cabinet, in its decision dated March 19, 2025, approved the waiver of LPI amounting to Rs. 68.6 billion in the books of SNGPL, pertaining to the RLNG supplies to NPPMCL-Haveli Bahadur Shah, NPPMCL-Balloki, Quaid-e-Azam Thermal and Nandipur Power Plant. Furthermore, the Task Force resolved the longstanding dispute between the GPPS and SNGPL of the originally agreed 66 percent minimum Take-or-Pay arrangement for RLNG supplies, which was reduced by ECC, in its decision of January 11, 2023, to 0% for Quaid-e-Azam Thermal (Pvt.) Ltd. and to 33 percent for Haveli Bahadur Shah and Balloki Power Plants. This was resolved in favour of the SNGPL, in the larger interest of gas consumers, by maintaining it at 66 percent till December 31, 2024 and to 50 percent thereafter, with a clear agreement between SNGPL and GPPs on the calculation mechanism. The associated financial impact of Rs. 21.9 billion, subject to auditor verification, was also approved by the Cabinet in the decision.
It was informed to the Task Force that the pricing mechanisms for “System Gas” and the “RLNG” operate under separate regimes under the policy frameworks issued by the Federal Government. However, the Task Force recommended that the verified Net Take-or-Pay proceeds be credited to RLNG sales revenues to offset and reduce the RLNG cost for consumers. In order to give effect to the adjustment within the RLNG cost-of-service structure, as determined under Section 43(b) of the OGRA Ordinance, 2002, it is imperative for the Federal Government to issue a policy guideline under Section 21 of the said Ordinance, enabling the OGRA to incorporate the Cabinet-approved adjustment of Rs. 21.9 billion into the Cost of Supply of RLNG.
After explaining the background, Power Division sought ECC nod on the following proposals: (i) approve the Memoranda of Understanding (MOUs) with the PAEC and authorise the CPPA-G to execute the Negotiated Settlement Agreements (NSA) based on the MoUs; (ii) authorize CPPA-G and the PAEC to amend the relevant PPAs as per the NSAs and make any relevant changes to standardize such amendments; (iii) approve facilitation measures to be provided by GoP for Nuclear Power Plants; (iv) subject to the facilitation agreed by the Federal Government authorize PAEC to file tariff petitions with the NEPRA for respective nuclear power plants based on the debt adjustments agreed in NSAs, authorise CPPA-G to pay outstanding liabilities of GPPs from the funds available from the CD financing facility; (vi) amend the previous Federal Cabinet of June 18, 2025 for PHL loan repayment to the extent of Rs 23.607 billion, approve waiver of LPI of Rs. 119.53 billion receivables by the three GPPs from CPPA-G; (vi) authorize CPPA-G to pay remaining balance (on the date of disbursement) to OGDCL through UPL -I and UPL-II, from the CD financing facility, which currently is being paid in monthly instalments ; and (vii) issue a policy guideline under Section 21 of the OGRA Ordinance, 2002, enabling the OGRA to incorporate the Cabinet-approved adjustment of Rs. 21.9 billion (subject to the verification of the Auditors) into the cost of Supply of RLNG.
On the proposal of Rs 21.99 billion, Oil and Gas Regulatory Authority (OGRA) is of the view that it understands that the next impact of adjustments in the cost of supply of RLNG shall increase the end consumer price of RLNG, as against the ongoing efforts of the Federal Government to reduce the prices.
Further any claim by SNGPL in future cost or service, as per the decision of ECC/ Cabinet is required to be dully supported by the certificate from an independent auditor, other than the Company’s statutory audit firm, duly verified the claim/ approved from/ by the Power Division/ GPPs.
On the proposal, in which Power Division sought approval of Memoranda of Understandings (MoUs) with Pakistan Atomic Energy Commission and authorize CPPA-G to execute the Negotiated Settlement Agreements (NSAs) based on the MoUs, Finance Division has stated that the modalities in terms of clause 1.2(a) of the 2nd MoU with regard to adjustment in PSDP allocation in the context of repayment of foreign loan require, Power Division may ensure that commitments in the MEFP with regard to non-cash adjustment are adhered to..
The facilitation by Government of Pakistan on MoU-1 says ;(i) subject to the execution of section 1.2(b) of the second MoU, out of the payment as specified in section 1.2(a) of 1st MoU, Rs.153 billion (after payment of Rs. 54 billion as overdue payment to fuel supplier, as of December 31, 2024) shall be paid by the PAEC to the Ministry of Economic Affairs, as a pre-payment of its Foreign Relent Loan (“FRL”), within two weeks from the date of receipt of such payment by the Commission.
Memorandum of Understanding- 2: the GoP shall facilitate the PAEC to adjust a portion of Rs. 241 billion of the existing FRL (“Foreign Relent Loan”) against the balance PSDP allocations of Rs. 131 billion of K2/K3 project. After such an adjustment, the remaining FRL will be reduced to Rs. 110 billion.
In case the PAEC does not receive the adjustment of Rs. 131 billion, as specified in section 1.2(a), the existing FRL shall remain unchanged, and will be paid to EAD out of receipts of Rs. 316.937 billion which is to be paid by power purchaser as per section 1.2(a) of the first MoU.
Copyright Business Recorder, 2025