ISLAMABAD: The Federal Cabinet has granted “explicit” approval to the Memoranda of Understanding (MoUs) signed between four dozen Independent Power Producers (IPPs) and Government of Pakistan (GoP) to be converted into agreements, well-informed sources told Business Recorder.
The government’s team has already started talks with the IPPs on the language of draft agreements aimed at finalising the pacts for final approval of the Cabinet. However, disagreement was witnessed between the IPPs and the government’s team on mode and duration of payment.
On November 26, 2020, the CCoE was informed that a summary of Power Division titled “explicit approval for report by the Committee for negotiations with IPPs” as additional agenda item was received in the Cabinet Division after the deadline of seven days prior to the meeting, as stipulated in Rule 18(6) read with Rule 23(4) of the Rules of Business, 1973.
Therefore, Secretary, Power Division requested the Chairman, CCoE, for consideration of agenda as urgently required. The Chairman, CCOE allowed the request to table the summary in consideration of proviso of the rules.
The forum was informed that the CCoE considered the summary of October 26, 2020, submitted by the Power Division and directed Power Division on October 29, 2020 to: (i) make specific recommendation for consideration of CCoE and; (ii) refer the MoUs to Law and Justice Division for advice on the need for their approval by CCoE/Cabinet.
In pursuance of directions, Law & Justice Division shared the following advice on November 19, 2020 “that in the MoU, between the Committee for Negotiations and IPPs, it was agreed that the terms of MoU are subject to approval of Nepra and the Federal Cabinet; as such approval of the Federal Cabinet is required.
The CCoE is a Committee, of the Federal cabinet, constituted under rule 17 (I) (c) of the Rules of Business, 1973, and is mandated to technically examine, recommend and take policy decisions in respect of energy sector. Therefore, the MoUs may be placed before the CCoE for consideration. In terms of Rules of Business, 1973, the decision of the CCoE shall be placed before the Federal Cabinet for ratification/approval.
In view of the advice rendered by Law Division, Power Division requested the CCoE to grant explicit approval of the MoUs.”
The sources said, Adviser to the Prime Minister on Commerce and Investment, Abdul Razak Dawood and SAPM on Petroleum and Natural Resources, Nadeem Babar recused themselves in respect of agenda item being related to IPPs.
The Committee has shared Master Agreement with the IPPs established under Power Generation Policy 2002.
The terms and conditions of the agreements to be signed with the GoP, NTDC and CPPA-G are the same as in the MoUs.
According to the draft Master Agreement, a copy of which is available with Business Recorder, the IPPs will file a tariff petition to give effect to and for the implementation of section 3, 4, 5, 6 and 8 of this agreement to the fullest extent possible and to ensure the determination of Nepra fully encapsulates the provisions referred herein.
The agreement says, the company shall convert their contracts to take and pay basis, without exclusivity when competitive trading arrangement is implemented and becomes fully operational, as per the terms defined in the licence of each company.
The power purchaser shall work towards providing access to the bilateral market, at the earliest and the GoP shall actively support the creation of competitive power market.
The company agrees to be bound by the decision or determination of Nepra for the mechanism for recoveries, where applicable, pursuant to the reconciled numbers between the committee and the company to assess if the company has made any excess profit as filed before Nepra.
The power purchaser in ensuring its adherence to the contractual obligations has devised the repayment mechanism for outstanding receivables within an agreed time period.
The parties agree that this amendment constitutes the entire agreement of the parties with respect to the matter therein upon its effectiveness and supersedes and replaces all prior oral land/on written agreements and understandings relating to this agreement.
The draft agreement states “the power purchaser and the company hereby agree that the PPA is hereby modified through this agreement.”
