Nishat Power revises tariff model in line with PM’s task force recommendations

KARACHI: Nishat Chunian Power Limited (NCPL) has approved a tariff revision to transition to a ‘hybrid take and pay’ model, as proposed by the prime minister’s task force on energy reforms. The decision was made during a board meeting and communicated to the Pakistan Stock Exchange (PSX) on Wednesday.

The revised tariff will apply to the company under the Power Purchase Agreement (PPA) and Implementation Agreement (IA) following amendments negotiated with the government and the Central Power Purchasing Agency (Guarantee) Limited (CPPA).

The amendments are effective retroactively from November 1, 2024. Per the revised tariff: the indexation mechanism for operations and maintenance (O&M) costs has been revised. The tariff components for O&M and the cost of working capital have been rebased. The RoE tariff will now be paid under a hybrid take-and-pay model.

The insurance premium tariff component is capped at 0.9 per cent of the engineering, procurement and construction (EPC) cost. NCPL will share profits for the fiscal year ending 2023, which will be adjusted against receivables from the CPPA. The government will withdraw arbitration under the Arbitration Submission Agreements (ASA). The company’s undertaking to retain receivables until the conclusion of arbitration will be revoked. Outstanding receivables as of October 31, 2024, will be paid within 90 days of the agreement’s cabinet approval. Delayed payment surcharges up to October 31, 2024, will be waived. The London Court of International Arbitration (LCIA) clause in the PPA will be replaced with an Islamabad-seated arbitration process under local laws.

NCPL’s board also approved an amendment agreement with the government and the CPPA to operationalise the revised tariff. The changes are expected to streamline energy transactions, improve receivable recoveries and align the company’s operations with the broader energy sector reforms envisioned by the Prime Minister’s Task Force. The revised tariff model is part of a broader effort to enhance efficiency and transparency in the power sector while reducing financial bottlenecks for independent power producers (IPPs).