ISLAMABAD: During the much-awaited talks with the independent power producers (IPPs), the government here on Thursday placed a set of demands for material changes in power purchase agreements (PPAs) paving way to reduce the tariff for domestic, commercial and industrial sectors asking to provide ease to the people and making industry stand on its feet, a senior official who was part of the meeting told The News.
A set of eight demands from the government was put in place knowing the fact that it will be tantamount to negation of the power policies offered to investors in 1994 and 2002 and power purchase agreements (PPAs), which are signed and sealed transactions supported by sovereign guarantees.” A six-member committee, headed by the federal minister for energy Omar Ayub Khan, while other members including federal minister for law and justice Barrister Dr Muhammad Farogh Naseem, special assistant to prime minister on coordination of marketing & development of natural resources Shahzad Syed Qasim, secretary for law Muhammad Khashish-ur-Rehman, secretary finance Naveed Kamran and secretary Power Division, held talks with the chief executive officers of the IPPs but not with the owners.
The talks were held with the IPPs according to the power policies’ installed periods, as IPPs installed under 1994 power policy, IPPs installed under 2002 power policy and IPPs installed before 1994 power policy. It were formal talks to holistically look at the parameters seeking solution of the power sector issues being faced for long. Meanwhile, the government had come up with a charter of demands asking for slicing down the capacity payments, return on equity, penal charges, changing foreign exchange indexation into PKR indexation for local investors, getting heat rate of the plants done, rescheduling or increasing the debt terms, and reducing operations and management costs.
Secretary Power Irfan Ali, a member of the committee, when contacted by The News said that it was just an introductory meeting, saying he would confirm the terms of reference (ToRs) today (Friday) for the talks with time-frame as the officials were currently working on it. Ali also disclosed that the energy minister had constituted a technical committee comprising special assistant to the prime minister Shahzad Syed Qasim, Managing Director PPIB Shah Jahan, senior joint secretary finance Anwar Sheikh, Waseem Mukhtar, additional secretary (Power Division), CEO CPPA Abid Lodhi and joint secretary law.
“This technical committee will remain in talks with the representative of IPPs. However, the six-member committee headed by energy minister Omar Ayub Khan will be meeting with IPPs committee next week,” Ali said. A senior official of Power Division told The News that the charter of demands placed before the IPPs were not simple but there was complexity in the details when it came to changing the foreign exchange indexation into PKR indexation. He said the IPPs would not accept it and more importantly they would not budge on the demand of decreasing the return on equity, as these have been assured in the power policies of 1994 and 2002.
During the meeting, the IPPs have pleaded that the power tariff has increased because of 20 per cent losses and 20 percent taxation, and if these issues were addressed, the power tariff could be cut down. “We listened to the government side and asked to provide the ToRs and once they (ToRs) are received, we will evaluate them and discuss them with sponsors, and board of directors, and then we will be able to respond to the government’s demands,” Khalid Mansoor, CEO of HUBCO, stated while talking to The News. “The demands should be made with the bottom-line and what impact they will be having in reducing the power tariff,” he added.
The IPPs have also raised the issue of payment of their dues which have swelled over Rs600 billion, while the government said that the work on this account was underway and Sukuk of Rs200 billion would soon be materialised and to this effect, the Power Division had asked for some share in PM Relief Fund to provide ease to the cash flow in power sector, which had deteriorated more in the situation that emerged due to COVID-19. Khalid Mansoor said the IPPs had asked the government to provide report of nine-member committee headed by the ex-SECP chairman Muhammad Ali, saying that it was being discussed in the media but the IPPs which are the biggest stakeholders were denied access to the report.
“However, the government said the report is lying on the table of the prime minister and Power Division needs to fulfill the procedural requirements in the way of getting hold of the report and permission to share with IPPs,” the CEO HUBCO stated. He said during the meeting, the IPPs had taken strong cognizance of the media trial for branding them as swindlers and argued that how media had got access to the report which was sacred to them.
Mansoor added that the IPPs were facing vilification and maligning campaign under systematic propaganda, knowing the fact that they had invested in power sector as per the government policies and never breached any contract for making excessive profit. “We have also been asked by the government to make a representative body of the IPPs, which will attend the next meetings with the six-member government committee,” he said. Mansoor also stated that the IPPs could provide solace to the government being aloof from the terms and conditions mentioned in the PPAs but they would not be ready to agree on material changes in the PPAs.
Khalid Mansoor mentioned saying, “Previously, nine IPPs had already given a lot of relaxations to the government in the form of settlement agreement, for giving priority to the national interest. Yet it was the government that has been unable to obtain formal approval to implement the same; hence that opportunity has been lost. The settlement agreement was consented by such IPPs that had won the arbitral award by the London Court of International Arbitration (LCIA) in 2017 for the recovery of unpaid capacity payments, which had been deducted in contravention of legally valid and binding power purchase agreements.” However, it was the Power Division which had so far failed to get nod from the decision making authorities to sign the agreement.
