ISLAMABAD: The government has successfully renegotiated tariffs with 14 Independent Power Producers (IPPs), securing Rs813 billion in savings for consumers and addressing circular debt amounting to Rs329 billion.
As part of the agreement, the IPPs have agreed to return Rs31 billion in excess profits, a reduction from the initial Rs55 billion claim. Additionally, the government has decided to close investigations by the National Accountability Bureau (NAB) and the National Electric Power Regulatory Authority (NEPRA) against certain IPPs, including Nishat Power Limited, Nishat Chunian Power Limited, Liberty Power Tech Limited, and Atlas Power Limited.
Key Terms of the Agreement:
Waiver of Late Payment Interest (LPI):
Prospective buyers of UPL and UPL-2 agreed to waive Rs62.5 billion in LPI receivables on the condition that the government facilitates the waiver of Rs46 billion in LPI claims by OGDCL.
Five IPPs on the SNGPL network waived Rs4.6 billion in LPI receivables in exchange for the government’s facilitation of Rs1.9 billion LPI claims by SNGPL.
Hybrid Take-and-Pay Model Implementation:
Return on equity (ROE) converted to Pakistani Rupees.
Reduction in capacity payments and tariffs.
Fixed Operations and Maintenance (O&M) costs to be paid based on actual costs rather than full capacity.
ROE to be paid based on actual energy generation instead of a fixed model, ensuring sustainability with a minimum guaranteed ROE.
Settlement of Past Disputes:
Arbitration process for 12 IPPs was pending due to legal complexities. The government negotiated recovery of past savings, with a 90-10 sharing ratio favoring the power purchaser.
The government and 10 IPPs reached a settlement, allowing for a recovery of Rs31.65 billion from past savings.
Regulatory and Legal Closure:
Government agreed to withdraw all claims against nine IPPs with Arbitration Submission Agreements (ASAs) and Uch-II Power Limited.
Proceedings initiated by NEPRA against certain IPPs for abnormal profits and fuel savings were withdrawn.
NAB Lahore approved the termination of investigations and referred the matter to the Ministry of Energy (Power Division).
Broader Reforms in the Power Sector
A Task Force on Structural Reforms recommended tariff renegotiations with 18 IPPs—including five thermal plants under the 1994 Power Policy and 13 plants under the 2002 Power Policy. After multiple discussions, revised tariff structures were agreed upon for 10 IPPs from 2002 and four from 1994.
Additionally, the Task Force recommended terminating one IPP from the 1994 Power Policy and including KAPCO in the grid. Talks continue with Laraib Power Limited, Orient Power Company, and Halmore Power Generation.
Government officials hailed the agreement as a major step toward resolving circular debt, stabilizing electricity tariffs, and reducing the financial burden on consumers.
Story by Zafar Bhutta
