ECC approves amended deals with 46 IPPs

By Khalid Mustafa
February 09, 2021

ISLAMABAD: In a landmark development, the Cabinet Committee on Energy (CCOE) and Economic Coordination Committee (ECC) here on Monday accorded approval to the conversion of MoUs into amended agreements and the payment mechanism of dues of 46 IPPs of Rs403 billion in two installments.

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The remaining one wind IPP is also likely to sign the amended power purchase agreement before the deadline of February 12, 2021. The implementation of amended PPAs of 47 IPPs will help ensure discounted tariff of Rs836 billion in their remaining periods. The federal cabinet that meets today (Tuesday) will ratify the decisions of CCOE and ECC about the agreements with IPPs along with payment mechanism.

Tabish Gauhar, Special Assistant to PM on Power, while talking to The News, confirmed the development saying some IPPs seeking the resolution of disputed amount of Rs50 billion in the head of excess profit were not included in the claims of Rs403 billion. The remaining wind IPPs having claims of Rs2 billion are likely to sign the amended PPA before the deadline of February 12, 2021 -- the expiry date of MoUs.

The ECC also approved the formation of local arbitration court comprising one senior retired judge of Supreme Court to be suggested by six IPPs, other one to be recommended by the government side and then two judges will nominate the third neutral judge and this is how the three-member local arbitration court will decide the issue of excess profit. The decision will be binding on both the parties to the dispute. The local arbitration court will decide the issue within five months time.

According to the summary of Power Division approved by the ECC, the Implementation Committee has agreed the payment mechanism with 46 IPPs to clear the outstanding payables as on 30th November 2020 amounting to Rs403 billion. As per payment mechanism, the payment of said amount will be made in two installments; the first installment will be forty percent (40%) of said payables and will be paid 1/3rd in shape of cash, I/3rd in Sukuk and in 1/3rd PIB bonds at floating rate of T-bill + 70 bps and remaining sixty percent (60%) of the said payable within six months of the first installment.

The ECC also approved the permission to continue negotiations with the remaining IPPs that include TNB Liberty, UCH Power, Zephyr Power Wind, China Three Gorges, Laraib Energy and Star Hydro Patrind. The government will also initiate talks with power projects set up under the 2015 power policy.

The summary, while mentioning the IPPs set up under the 1994 Power Policy, says that apart from other concessions achieved under the MOUs signed, the IPPs agreed to remove USD indexation on 50pc of the reduced capacity payments.

On the date of the signing of MoUs on August 12, 2020, the exchange rate was at Rs168.60 against one US dollar. Since the current exchange rate is lower than Rs168.60, the Implementation Committee did not agree to the said stipulation of the MoU. Agreements have been initialed on the condition that the exchange rate prevailing on the date of signing of the Master Agreements will be used as the floor for the exchange rates, and Rs168.60/USD as the ceiling for said exchange rates. The risk of a devaluation of the USD shall lie with the Power Purchaser. This risk is, however, adequately mitigated through the reduction in capacity purchase price and variable O&M of this group.

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