Summary sent to cabinet: Govt to pay Rs72bn to 5 IPPs

ISLAMABAD: The summary submitted to the federal cabinet and details of settlement with the five independent power producers (IPPs) reveal a mutually agreed-upon termination of contracts.

Besides clearly stating that the said IPPs have voluntarily ended their contracts in the supreme interests of the country after friendly and cordial talks with the government, the details of the summary, available with The News, suggest the government ensured the IPPs are not treated unfairly. Top government sources said the government agreed to request the State Bank for repatriation of dividends to their registered foreign shareholders. Sources have also confirmed that CPPA has already started working on making payments to IPPs before 90 days.

However, the credibility of the government hinges on the timely payment of Rs72 billion to the five IPPs within 90 days. When asked if the IPPPs were coerced into terminating contracts, one of the IPP owners rejected that impression and told The News on condition of anonymity that when they signed the documents to terminate the contracts, it meant they had agreed. He said the government has abundant liquidity and they should make the payments to the five IPPs at the earliest.

Pakistan is eyeing investment from KSA investors in various economic sectors after the signing of 27 contracts. The summary approved by the federal cabinet says that after mutual understanding and cordial talks, the power purchase agreements were scrapped. The Hubco (Hub Power Company Limited) would get a net amount of Rs36.5 billion as capacity payments and energy costs and would get rid of its Rs28 billion liability to PSO against its receivables under the first fill deduction. However, nothing will be paid in lieu of late payment interest amounting to Rs14 billion under normal operations. It was a complex deal with Hubco that ended in a win-win for all. HUBCO had won the case of Rs11.5 billion plus interest payments of Rs17 billion in arbitration court against CPPA (Central Power Purchase Agency)-G for wrongly deducting against the First Fill. However, HUBCO owed PSO Rs14 billion and another Rs.14 billion in late payment interest. The government, through an amicable settlement, adjusted Hubco’s receivables of First Fill deduction of Rs11.5 billion against its payables to PSO and the PSO agreed to waive the interest amount. The PSO’s agreement would help save Rs. 411 billion in future payments.

In a letter discussing the disclosure of Material Information, HUBCO says the government and CPPA have agreed to settle the company’s outstanding receivables up till Oct 1, 2024. The Hubco Board has approved the terms of the settlement. Kamran Kamal, CEO of Hubco also confirmed that the company would get Rs36.5 billion, but refused to divulge the details of the settlement of the outstanding dues with CPPA against PSO’s dues, saying their company has no liability towards the government and in return, the state-owned entities have no liability towards HUBCO. However, the government would pay Hubco Rs36.5 billion. To a question, he hoped that the said amount would be paid within 90 days. However, in 2020 after the first revision of PPAs, the government violated the payment deadline and it took one and a half years to complete the payments to IPPs. When asked if IPPs are treated fairly during the talks Kamal didn’t offer any comment. However, he said that creating the private power market and making it functional is a challenge for the government and it must focus on reforming NTDC and Discos to reduce theft and ensure the lifting of cheaper electricity from the southern part of the country to reduce the overall tariff.

According to the summary, Atlas Power also agreed to end its arbitration with the government and paid savings in fuel and O&M amounting to Rs4.7 billion. Saba Power also ended its pending arbitration. Rousch Power agreed to work with the government for the transfer of its plant set up under the BOOT (build, own, operate and transfer) basis. Lalpir also agreed to waive its late payment interest in line with the principle set for all IPPs. This amicable settlement also led to the government not pursuing the option of any forensic audit against IPPs.