ISLAMABAD: Development Finance Institutions (DFIs) with financial stakes in Independent Power Producers (IPPs) have approached the National Electric Power Regulatory Authority (NEPRA) Chairman to revise tariff determinations, adjusting the benchmark interest rate from the London Interbank Offered Rate (LIBOR) to Term SOFR (Secured Overnight Financing Rate) plus Credit Adjustment Spread (CAS), sources in NEPRA report.
DFIs, including the Asian Development Bank (ADB), British International Investment Plc (BII), International Finance Corporation (IFC), Islamic Development Bank (ISDB), and others, have extended financing to various IPPs in Pakistan. Previously, the energy tariffs and foreign currency loan arrangements for these IPPs were linked to LIBOR, which ceased publication on September 30, 2024, necessitating an alternative benchmark. In response, DFIs confirmed that they, along with IPPs, have opted for Term SOFR+CAS to replace LIBOR.
The DFIs’ letter to NEPRA outlines an urgent request for tariff modification, accompanied by draft amendment agreements to the Energy Purchase Agreement and Implementation Agreement for review. DFIs seek NEPRA’s non-objection to these amendments, along with formal permission for IPPs to apply Term SOFR+CAS for immediate invoicing under the new terms until the tariff adjustments are formally implemented. This shift is considered critical, as amendments must be coordinated with the Private Power and Infrastructure Board (PPIB) and the State Bank of Pakistan prior to upcoming tariff indexation and interest payments.
Story by Mushtaq Ghumman
