Islamabad:
The Government has successfully reached an agreement with 14 independent energy producers (IPP) to review tariff .
According to the reviewed agreement, IPP have agreed to return excess profits for a total of RS31 billion, compared to the initial claims of RS55 billion. In addition, the Government agreed to close the ongoing investigations of the National Office of Responsibility of Responsibility (NAB) and the National Electric Power Regulation (Nepra) authority against certain IPP, including Nishat Power Limited, Nishat Chunian Power Limited, Liberty Power Tech Limited and Limited Atlas Power.
As part of the negotiations, the IPPS also agreed to renounce their claims for late payment interest (LPI) on pending amounts.
Possible UPL and UPL-2 buyers had agreed to renounce their claim of accounts receivable of Energy Buyer worth RS 62.5 billion with the condition that the Government facilitates the exemption of LPI’s claim for OGDCL of UPL and UPL-11 ascending to RS 46 billion. OGDCL had not registered that LPI claiming in his account books.
Similarly, five IPP on the SNGPL network had also resigned from their accounts receivable LPI to the energy buyer that amounts to 4.6 billion with the condition that the government would facilitate in the exemption of SNGPL LPI claims at 1.9 billion RS 1.9 billion for IPP.
According to the agreement, the IPP had agreed to convert the entire return on the heritage (ROE) to the rupe and the reduction in capacity payments and the rate under a hybrid model of taking and payment.
Both parties also agreed to the solution of the excess savings of the past and the exemption of late payment interest.
Government officials said the agreement was the best for the country, which resulted in a saving of RS813 billion and resolved the circular debt for an estimated amount of RS. 329 billion. Circular debt as a “bottomless well” was a hemorrhage of the economy.
The working group on the structural reforms of implementation in the electricity sector, constituted by the Prime Minister, had deliberated about the recommendations of the operator of the proposed system to continue the operations of 18 IPP: five thermal plants under the electrical policy of 1994 and 13 plants under 2002 Electrical policy (12 thermal and a hydroelectric) with a view to renegotiate its tariff structures.
After the system operator recommendation, the working group maintained several rounds of discussions with the sponsors of these IPP and managed future rates.
The working group also negotiated and recommended the recovery of excess savings of the past by 10 IPP under the 2002 electrical policy. Contractual negotiations with the remaining three IPPs of the 2002 energy policy, namely Laraib Power Limited, orient Power Company (PVT) Limited and Halmore Power Generation Company Limited, were still in process.
The system operator even more recommended an IPP under the 1994 electrical policy and including Kapco in the network, which was also negotiated and recommended by the task force.
On the reduction of the payment of the capacity and the rate under a hybrid model of taking and payment, the IPP had agreed to reduce their rates under a model where their cost of fixed operations and maintenance (O&M) would be paid based on their existing real O & M (Take or pay with reduced payments in the future).
Its ROE would be paid based on its real energy generation instead of the current payment model on total capacity, with a certain minimal ROE agreed to guarantee sustainability. Consequently, the agreements were reached to implement the reduction of the rate under a hybrid model of taking and payment.
With respect to the dispute between the Government and the 12 IPP, after the March 16, 2020 report, presented to the Government by the Energy Sector Audit Committee, Resolution of the Circular Debt and Future Route Map, and renegotiatives maintained Between the government and the electrical plants established under 2002 Politics, a RS dispute. 55 billion with respect to excess savings by IPP in the past emerged. The Government and the 12 IPP agreed to present the arbitration dispute under the terms of the arbitration presentation agreements (handles) executed on June 15, 2022.
These ASA were executed on September 13, 2021 and on December 24, 2021. The Government and the IPP were able to form the court as the judges, as required by the handles, but the arbitration procedures remained pending during the last three years due to various legal and procedural matters.
Due to prolonged pendency, the working group negotiated the recovery of past savings with these IPP and recommended the recovery based on the model that from COD to 2021, the savings made by the IPP in fuel will be calculated by deducting the cost of Eligible real fuel, as reported in the annual audited financial statements of the respective years, of the payment allowed instead of the fuel cost component by the IPP for the corresponding years.
These savings will be shared in the 90% ratio for the energy buyer and 10% for the IPP. From 2022, the exchange mechanism for savings in the cost of fuel will be determined in accordance with the provisions of the master agreements executed between the energy buyer and the IPP.
From COD to 2021, it was agreed that the savings in O & M will be calculated by deducting the eligible real O & M IPP for IPP for the corresponding years IPP.
In addition, a review reserve is allowed to be presented to IPP to cover and pay the cost of plant reviews and machinery in future years. IPP will be required to take into account the review reserves in their audited financial statements, and 100% of the unused reserves, if any, will be transmitted to the energy buyer. From 2022, the exchange mechanism for Savings in O&M will be determined in line with the provisions of the master agreements executed by the relevant IPP and the energy buyer.
In the agreement of the dispute with nine IPP that have handles and UCH-II Power Limited, an agreement with the 10 IPP was proposed, so a amount of RS. The energy buyer calculated 31.65 billion for the recovery of the IPPS energy buyer instead of past savings.
After the recovery of the fuel and the O&M savings of the past, the Government agreed to withdraw and extinguish unconditionally and irrevocably all claims against the relevant IPP under the respective nine ASA and the claim disputed with the power UCH-II (private) limited. It was agreed that IPP and the relevant government will be communicated together with the court established under the handles to formally end and renounce the arbitration procedures.
In addition, it was agreed that the Government will facilitate Nishat Power Limited, Nishat Chunian Power Limited, Liberty Power Tech Limited and Atlas Power Limited in the withdrawal of the procedures initiated by Nepra against them to obtain abnormal profits/excess savings in fuel and O & M. Nab Lahore, in his letter on February 9, 2024, informed that the competent authority had approved the termination of the investigation at the end of NAB and sent the matter to the Ministry of Energy (Energy Division) with specific reference to the invocation of arbitration In the matter.
