ISLAMABAD: The Cabinet Committee on Energy (CCoE) on Thursday did not approve payment of Rs399 billion to independent power producers to let all the members satisfy their conscience in three days if the finalised deals are prudent and no wrong decision is being imposed.
Presided over by Minister for Planning and Development Asad Umar, the committee also desired that sponsors of the upcoming LNG terminal should be given maximum confidence to complete their projects and warned some stakeholders that moving the goalposts that discourage private local and foreign investors would not be allowed.
Sources said the committee was informed that an implementation committee led by Finance Minister Dr Hafeez Shaikh had “agreed the payment mechanism with 44 IPPs to clear the outstanding payables as of Nov 30, 2020 amounting to Rs399bn”.
As per the payment mechanism, the amount will be paid in two instalments. The 40 per cent of said payables will be paid one-third in cash, one-third in 5-year sukuk and one-third in 10-year PIBs at floating rate of T-bills plus 70 basis points. The remaining 60pc will be paid within six months in almost the same manner.
A report of the implementation committee on detailed payment mechanism and IPP-wise payable was also attached to the summary to the CCoE. The meeting was informed that Finance Division was part of the implementation committee and “due to paucity of time and to meet the deadline of Feb 12, 2021 being the expiry of the MoUs, the Power Division did not circulate the summary to National Electric Power Regulatory Authority, which should give its view point during the meeting.
Agreement on local arbitration
It was reported that an alternativee option of the Arbitration Submission Agreement for all IPPs under the 2002 Power Policy was also agreed upon. Under this, the IPPs have agreed that this local arbitration — comprising one member to be nominated by each side and third by these two arbitrators — will be binding and final as far as the dispute of excess profitability was concerned.
One paramount consideration agreed with local arbitration was to avoid the situation where the IPPs could have eventually taken the dispute to the London Court of International Arbitration and to avoid significant loss to the public exchequer. Also, the Arbitration Submission Agreement had been given to the law ministry for vetting.
Some senior members of the CCoE wanted to delay approval of the deals finalised with IPPs by Hafeez Shaikh led implementation committee on the pretext that they required reasonable time to go through the large bundles of agreements and attachments. Mr Shaikh, however, insisted that it had to be cleared by Monday for endorsement by the cabinet in its meeting due on Feb 9 and provide for three more working days to conclude the entire process.
Finally, the CCoE decided that given the sensitivity and importance of the issue, all the members should take the documents home for complete examination over three holidays and come back with clear recommendations for a final decision which reflect the collective wisdom and considered position of the government.
It was therefore decided that the committee would be reconvened on Feb 8 for a final decision in the matter.
Advance force majeure notices
Informed sources said the key members of the CCoE expressed displeasure over changing positions of the Petroleum Division, from issuance of NOCs to allocation of pipeline capacity and advance notices in case of force majeure events. They said such tactics would discourage private investment and hence the terminal developers who had reached an advanced stage should be given complete confidence that they would not be mistreated and put to disadvantageous position on completion of their terminals with huge investment.
“The CCoE decided that in order to provide fair and level playing field to new LNG terminal, the existing available capacity in pipeline will be allocated to any applicant including CNG, meeting the requisite criteria for three months rolling basis till such time the new terminals achieve commercial operations date.
The meeting was informed that a sub-committee on existing pipeline capacity to new LNG terminals has concluded that within 10 days each one of the new LNG terminals — Tabeer and Energas — would convey their proposed completion date and Ogra would allocate spare pipeline capacity until that completion date of the first of the two LNG terminals, for short-term only.
