Islamabad:
The government has successfully concluded an agreement with 14 independent power producers (PPI) to revise the prices, which will lead to savings of 813 billion rupees for consumers and will help solve the circular debt, estimated at RS329 billion.
Under the revised agreement, PPIs agreed to return excess profits totaling 31 billion rupees, compared to initial complaints of 55 billion rupees. In addition, the Government has agreed to close the underlying surveys of the National Accountability Bureau (NAB) and the National Electric Power Regulatory Authority (NEPRA) against certain IPPs, including Nishat Power Limited, Nishat Chunian Power Limited, Liberty Power Tech Limited and Limited Atlas Power.
As part of the negotiations, the PPIs also agreed to renounce their complaints for late payment interest (LPI) on amounts in circulation.
Potential buyers of UPL and UPL-2 had agreed to give up their complaints of LPI claims of the electricity buyer worth 62.5 billion rupees provided that the government facilitates renunciation to the LPI complaint by OGDCL of the UPL and the UPL-11, showing Rs 46 Rs 46 billion. OGDCL had not recorded this statement of LPI in his account books.
Similarly, five PPIs on the SNGPL network had also given up their LPI claims of the electricity buyer for an amount of Rs 4.6 billion on the condition that the government would facilitate the renunciation of the allegations of SNGPL which represent 1.9 billion rupees towards PPI.
Under the agreement, the PPIs had accepted the conversion of all the equity (Roe) equity yields to the rupe and the reduction of capacity payments and prices as part of a hybrid model to take and pay.
The two parties also agreed to settle the excess savings dispute of the past and the renunciation of late payment interest.
Government representatives declared that the agreement was in the best interest in the country, leading to an economy of 813 billion rupees and adjusting the circular debt for an estimated amount of Rs. 329 billion. The circular debt as a “bottomless pit” was hemorrhage of the economy.
The working group on the implementation of structural reforms in the electricity sector, made up by the Prime Minister, had deliberated on the recommendations of the proposed system of the operations of 18 PI – five thermal power plants in Virtue of the electrical policy of 1994 and 13 factories under 2002 in 2002 power policy (12 thermal and a hydro) – with a view to renegotiate their tariff structures.
Following the recommendation of the system operator, the working group held several series of discussions with the sponsors of these PIPs and managed to renegotiate the tariff structure of 10 IPP under the power policy of 2002 and Four PPI under the power policy of 1994 to reduce the future rate.
The working group has also negotiated and recommended the recovery of excessive savings from the past for 10 PPI under the 2002 power policy. Contractual negotiations with the other three PPIs of the 2002 power policy, namely Laraib Power Limited , Orient Power Company (PVT) Limited and Halmore Power Generation Company, were still in progress.
The system operator has also recommended that IPP ended under the 1994 electrical policy and Kapco in the network, which was also negotiated and recommended by the working group.
On the reduction of payment of capacity and prices as part of a hybrid model to take and pay, the PPIs had agreed to reduce their prices in the context of a model where their fixed operations and their maintenance costs ( O & m) would be paid according to their existing real O&M (Take or pay with reduced payments in the future).
Their ROE would be paid according to their real energy production instead of the current payment model on all capacity, with a certain minimum agreed ROE to ensure sustainability. Consequently, the agreements were concluded to implement the reduction of prices as part of a hybrid model to take and pay.
With regard to the dispute between the government and the 12 PPIs, after the report of March 16, 2020 subject to the government by the Committee for the audit of the power sector, the resolution of the circular debt and the future roadmap, and The renegotiations held between the government and the power plants created under the 2002 politician, a dispute from Rs. 55 billion things on the excess economies by the PPI in the past have appeared. The government and the 12 PPIs agreed to submit the dispute to the arbitration under the terms of the arbitration submission agreements (ASA) executed on June 15, 2022.
These ASA were executed on September 13, 2021 and December 24, 2021. The government and the PPI were able to form the court by appointing the judges, as required by the ASA, but the arbitration procedure remained pending during the three last years due to various legal and procedural people is important.
Due to the prolonged pension, the working group has negotiated the recovery of past savings with these PIPs and recommended recovery on the basis of the model which, from DCO, until 2021, the savings made by the PPI in the fuel must be calculated by deduction of the real eligible cost, as indicated, as indicated in the annual verified financial statements of the respective years, of the authorized payment instead of the component of fuel costs by PIPs for the corresponding years.
These savings will be shared in the 90% ratio for the power buyer and 10% for the PPI. From 2022, the mechanism for sharing fuel cost savings must be determined in accordance with the provisions of the main agreements carried out between the food buyer and the IPP.
From Cod Till 2021, it was agreed that Savings in O & M shall be calculated by deducting the Eligible Actual O & M, as reported in the annual audited Financial Statements of the Respective Years, from the Payment Allowed in place of the O & M Component by the ipps for the corresponding years.
In addition, a revision reserve is authorized to PPI to cover and pay the cost of factories and machines revisions in the coming years. PPIs will have to take into account the revision reserves in their audited financial statements, and 100% of the unused reserves, if necessary, will be transmitted to the electricity buyer. From 2022, the Mechanism for sharing economies in O&M will be determined in accordance with the provisions of the master agreements executed by the IPP concerned and the electricity buyer.
On the settlement of the dispute with nine PPIs with ASA and UCH-II Power Limited, a regulation was proposed with the 10 IPPS by which an amount of Rs. 31.65 billion had been calculated for recovery by the buyer of IPP electricity instead of past savings.
Following the recovery of fuel savings and O&M from the past, the government has agreed to withdraw and irrevocably withdrawing all complaints against the relevant PPI under the respective nine asa and the disputed complaint with UCH-II Power (private) limited. It was agreed that the IPP and the relevant government communicate jointly with the court established under the ASA to officially terminate and abandon arbitration procedures.
In addition, it has been agreed that the government facilitates Nishat Power Limited, Nishat Chunian Power Limited, Liberty Power Tech Limited and Atlas Power Limited in the withdrawal of the procedures initiated by the NEPRA against them for abnormal benefits / excess economies in fuel and in hand. 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 the NAB and referred the case to the Ministry of Energy (Energy Division) With a reference specific to the invocation of arbitration on the subject.
