Govt power plants to get Rs1,069bn capacity payments

ISLAMABAD: Out of total capacity payments of Rs2,140 billions to be paid by consumers in the power tariff in FY25, the major share of Rs1,069 billion will go to government power plants and Rs707 billion to power plants set up under the CPEC umbrella, reveals the latest data available to The News.

However, the 10 IPPs set up under the 1994 power policy, would get just Rs72 billion per annum as capacity payment and 13 IPPs under 2002 policy Rs93 billion a year as the value of the US dollar for the said IPPs ceased at Rs148 during the PTI regime.

This is how 23 IPPs that are functional under 1994 and 2002 power policies in to to will be getting annual capacity payments of Rs165 billion. The volume of capacity payments of 23 IPPs comes up with an impact of Rs1.65 per unit.

However, the government has already announced to end the power purchase agreements (PPAs) of five IPPs (four installed under the 1994 policy and one set up under the 2002 policy). Doing away with the contracts of the 5 IPPs will help the government save Rs300 billion in the next 3-10 years.

However, sources told The News that some of the 5 IPPs have showed the intent to move London Court of Arbitration (LCIA) as some of their foreign lenders and shareholders are not ready to erase the contracts.

In addition, the government has decided to switch 17 IPPs on to take and pay mode from the existing take or pay mechanism. However, the government power plants would attain an enormous amount of Rs1069 billion. The Nuclear Power Plants would receive Rs466 billion in the shape of capacity payment in FY25, hydropower projects Rs446 billion, RLNG power plants Rs161 billion and GENCOs Rs16 billion. So the impact Rs1069 billion appears in the tariff as Rs10.69 per unit.

Interestingly, according to the data, the power projects installed under CPEC would be getting Rs707 billion as Rs7.07 per unit in the tariff, renewable wind power plants Rs161 billion as Rs1.61 per unit, solar plants Rs31 billion as Re0.31 per unit, bagasse based power plants Rs7 billion as Re0.7 per unit. The capacity payment for a single Sahiwal coal power plant exceeds that of all the 2002 IPPs combined. The capacity payment on government plants (nuclear, hydel and RLNG) is five times that of all old IPPs combined.

The IPPs average capacity tariff was at Rs2.78 per unit in tariff determination in 2015-16 but it increased to Rs18.39 per unit for FY2025 because of new addition of power plants under the 2015 power policy and the massive devaluation of Pak Rupee, which went down to Rs278 from Rs97 against one US dollar. More importantly, LIBOR [London Interbank Offered Rate] increased from 0.45pc to 5.5pc per annum, and KIBOR [Karachi Interbank Offered Rate] also jumped, increasing the debt servicing component of the capacity payments. The less consumption of electricity by masses because of the highest tariff in the region also caused escalation in capacity payments.

Of Rs2,142 billion capacity payments, currently the consumers pay per annum Rs1,083 billion in the head of debt servicing for the loans borrowed mainly for new addition in power generation under 2015 power policy, Rs218 billion as the fix O&M (operation and maintenance) charges, Rs596 billion as return on equity (RoE) and Rs254 billion in head of other issues.

Under the 1994 power policy, Uch power plant will get Rs15 billion, Liberty Rs6 billion, KEL Rs3 billion, Rouch Rs19 billion, FKPCL Rs4 billion, Lalpir Rs9 billion, Altern Energy zero, Pak Gen Power Ltd Rs10 billion, HUBCO Rs32 billion and Saba Rs3 billion.

However, the power plants set up under 2002 power policy, Foundation Power will get Rs4 billion, Engro Power Gen Rs4 billion, UCH-II Rs23 billion, Orient Power Company Rs5 billion, Halmore Power Rs5 billion, Sapphire Electric Co. Rs4 billion, Saif Power Rs3.77 billion, Attock Gen Rs3 billion, Nishat Power Ltd Rs4 billion, Nishat Chunian Power Ltd Rs4 billion, Atlas Power Rs5 billion, Narowal Rs5 billion and Liberty Power Tech Limited Rs4 billion.

The IPPs average capacity tariff, the officials said, was at Rs2.78 per unit in tariff determination in 2015-16 but it increased to Rs18.39 per unit for FY2025 because of new addition of power plants under the 2015 power policy and the massive devaluation of Pak Rupee, which went down to Rs278 from Rs97 against one US dollar. More importantly, LIBOR [London Interbank Offered Rate] increased from 0.45pc to 5.5pc per annum, and KIBOR [Karachi Interbank Offered Rate] also jumped, increasing the debt servicing component of the capacity payments. The less consumption of electricity by masses because of the highest tariff in the region also caused escalation in capacity payments.

“Of Rs2140 billion capacity payments, currently the consumers pay per annum Rs1,083 billion in the head of debt servicing for the loans borrowed mainly for new addition in power generation under 2015 power policy, Rs218 billion as the fix O&M (operation and maintenance) charges, Rs596 billion as return on equity (RoE) and Rs254 billion in head of other issues.”