Govt makes Rs 134b payment to IPPs
Earlier, the government has released Rs 58.2 billion to the Power Division to make payment onward to Independent Power Plants (IPPs) under Power Policy 2002.
Out of this money, the power division will pay Rs 52.4 billion to IPPs, accounting for 40 % under the 2002 Power Policy. It will pay Rs 5.8 billion to TNB Liberty Power Limited.
Economic Coordination Committee (ECC) has already approved a 40% payment Worth Rs52.4 billion of the total amount payable to IPPs of 2002 policy.
Sources said that the economic body of the cabinet had directed the Power division to submit a case of a supplementary grant for the remaining 60% payment to IPPs in accordance with the approved payment mechanism well before the due date.
Earlier, it had approved Rs 52.4 billion that accounting for 40% of the total payment to IPPs under power policy 2002.
Officials said that finance minister Shaukat Tarin had backed a plan of paying to IPPs under an approved mechanism.
In a meeting of ECC, the power division had submitted a report regarding supplementary grant of Rs 131.08 billion to eleven IPPs under power policy 2002.
Power division submitted a summary regarding 40% payment of the total amount payable to IPPs of 2002 policy.
Eleven IPPs will get Rs 131 billion from the government under Power Policy 2002 as the first installment.
Cabinet Committee on Energy (CCoE) had already directed Power Division to make payments to eleven IPPs except for Nishat CHunian.
NAB has already established that Nishat Chunian made Rs 8.6 billion. It had also advised recovering excess payment from all power plants under Power Policy 2002 in the national interest.
However, CCOE had directed to make payment to eleven IPPs except for Nishat Chunian.
Beneficiaries of Payment
There are eleven IPPs who may receive payment.
- Atlas Power
- Attock Gen
- Engro Energy
- Saif Power
- Halmore Power
- Hub Power(Narowal)
- Liberty Power
- Nishat Power
- Orient Power
- Foundation Power (Dharaki)
- Saphire Electric
Earlier, Cabinet Committee on Energy (CCoE) had directed Power Division to proceed with the payments of all 11 IPPs as per the signed agreement except a company whose cases are under investigation at NAB.
The Power Division submitted a report of the Implementation Committee on the ratification of the IPPs Agreement, under the 2002 Power Policy.
After a detailed discussion, the Committee approved the final report of the Implementation Committee and directed the Power Division to proceed with the payments of all 11 IPPs as per the signed agreement except a company whose cases are under investigation at NAB.
CCoE has stopped payment to the Mian Mansha power plant only that is under NAB investigation.
Earlier, Secretary Power Ali Raza Bhutta had said that payment to Independent Power Producers (IPPs) has resulted in bringing down the circular debt in the power sector.
He had briefed Senate Standing Committee on Power.
He said that the government had obtained Rs 480 billion from banks to make payments to IPPs in a bid to clear the circular debt.
Bhutta informed that bank borrowing had reached now Rs 800 billion.
Nepra has allowed 15 percent losses while the actual losses are around 17.4 percent, he added.
He said that lack of investment is one of the reasons for technical losses. The annual losses amount to Rs 67 billion on account of lack of investment in infrastructure and inefficiency.
Secretary power told the committee government would not give subsidies in the future as it would provide to the poor people only. “We have made payment of Rs 90 billion to the IPPs which resulted in the slashing Circular debt.
Managing Director CPPA, Waseem Mukhtar informed the committee that the power sector circular debt stands at Rs 2280 billion.
Chairman Senate Committee on Power has said that Sindh Police and politicians are involved in electricity theft.
The Discos employees are their accomplices.
Electricity theft is taking place in the colonies and offices of Sindh Police, said Chairman Senate Standing Committee on Power, Senator Saifullah Abro here.
He further said that in Sindh Politicians running 50 air conditioners in their houses and the employees of the distribution companies (Discos) are their accomplices in theft.
The committee also reviewed all policies related to guidelines for setting up of IPPs.
Secretary Power Division provided the Committees with details regarding policies formulated in 2002, 2006, and 2015. He informed the Committee that the cabinet has approved a subsidy reform proposal.
He added that this will ensure the equitable distribution of power. Members committee pointed out line losses and non-recovery is one of the main reasons for the increase in Circular Debt.
In a similar context, members inquired about electricity units provided free to DISCOs employees.
While discussing the performance of QESCO, Committee members stressed the need for providing electricity to areas of Jaffarabad, Nasirabad, and Gwadar.
Member of the Chamber of Commerce Gwadar, who was present in the meeting, shared the plight of Gwadar.
He also pointed out the electricity shortfall and power outages shutting down businesses in Gwadar.
He said that the Fish Export facility in Gwadar has been shut due to the closing of 60 ice factories as a result of recurrent power outages in the city.
Chairman Committee, Senator Saifullah Abro directed CEO QESCO to visit Gwadar at the earliest to address the issues and find alternate solutions.
Member Committee Hafiz Abdul Kareem asked why the government is charging TV fees in electricity bills. People with no TV and even Mosques are paying TV fees in their bills, he added.
K-Electric Agreement
Discussing the Power Purchase Agreement between National Transmission and Dispatch Company (NTDC) and K-Electric the Committee directed that details must be provided to the Committee under Rule 181 of the Rules of Business and Conduct.
Taking up the issue of the process of appointments in PESCO the Committee stressed that the report of the sub-Committee constituted earlier on the issue must be submitted on the Committee along with details of the new criterion for hiring and a copy of the advertisement placed in newspapers.
Earlier, the National Accountability Bureau (NAB) has reportedly permitted the Power Division to make payments to the Power Policy 2002’s Independent Power Producers–IPPs–in accordance with the revised contracts.
On June 16, 2021, the Power Division informed the Cabinet’s Economic Coordination Committee (ECC) that, based on a summary submitted by it on May 5, 2021, the ECC decided and the Federal Cabinet ratified the following decisions of the ECC on May 18, 2021.
Power division may process payments to all IPPs (under the Pre-1994, 1994, and 2006 Power Policies) in accordance with the signed agreements with the IPPs.
NAB is already investigating the stated savings in the tariff component of the IPPs of 2002 Policy. Power division may ask NAB to examine and validate the process of negotiations and signing of agreements, including the arbitration submission agreement. NAB may also notify if they have any issues to the signing of these agreements and the payment of IPPs under the 2002 Policy.
According to the sources, the Power Division accordingly relayed the ECC’s decision to the NAB on May 25, 2021. In response to the Power Division’s letter, NAB expressed their concerns in a letter on June 8, 2021. The Cabinet decision necessitated an evaluation and certification of the process power division already performed.
While NAB stated that it is investigating IPPs under the 2002 Policy, they have neglected to examine or validate the process, or to inform if they have any objections to these agreements or making payments to IPPs under these agreements.
According to sources, in light of prior decisions by the ECC and Federal Cabinet, as well as the response from the NAB, the Power Division submitted the following suggestions for consideration by the ECC.
The government may uphold payments to all IPPs under Power Policy 2002 who have signed agreements pursuant to MoUs until the NAB completes investigations.
Secondly, the process of signing the Arbitration Submission Agreement with IPPs under the 2002 policy and notifying them of their revised tariffs as determined by Nepra may face suspension until the NAB completes investigations.
According to the sources, ECC postponed the decision on the Power Division summary until June 16, 2021. However, NAB has now informed the Power Division that it may conduct the payment procedure for Policy 2002 IPPs in accordance with the updated agreements.
According to sources, the Power Division will now submit a fresh summary to the ECC in light of the NAB’s new message.
According to revised contracts, with payment of the first installation of the 2002 Power Policy IPPs reduced tariff will be applicable from the date of payment, increase in late payment charges on their undisputed payables will be stopped, leading to a reduction in circular debt rate test will be conducted as these IPPs agreed that the government can determine heat rate test to find out actuarial These revised contracts will save the government roughly Rs 180 billion or more.
Economic Coordination Committee (ECC) will take up the matter of making payment to IPPs established under power Policy 2002 again in the next meeting.
Earlier, the Economic Coordination Committee had deferred its decision earlier to make payment to IPPs established under Power Policy 2002 in Pakistan.
Now, ECC will meet on June 28, 2021 (Monday) to consider the summary again. However, ECC did not take up the matter and deferred it again.
On June 16, 2021, the Power Division told the ECC that the Cabinet Committee on Energy (CCoE) and ECC had already agreed on the payment mechanism and agreements with IPPs.
On May 5, 2021, the Power Division issued a summary that contained the following decisions the ECC on May 18, 2021: “Payments to all IPPs (under the Pre-1994, 1994, and 2006 Power Policy) may be handled according to the signed agreements, except for the IPPs under the Power Policy 2002 to the conclusion of an investigation by the National Accountability Bureau (NAB).”
It decided the NAB may review and verify the process of negotiating and executing contracts, including arbitration submissions. NAB may reveal if it has any concerns with the agreements and payments to the IPPs of the 2002 Policy.
On May 25, 2021, the decision of the ECC, as ratified by the Federal Cabinet, was conveyed to NAB. NAB has communicated their views through their letter of June 8, 2021. It stated that the IPPs of the 2002 Policy is under investigation, but declined to investigate or validate the process, or to inform if it has any issues with these agreements or to make payments to IPPs under these agreements.
A source says ECC had submitted the following proposals to the ECC: Firstly, the government may withhold payments to all IPPs that have signed agreements pursuant to the MoUs, under the Power Policy 2002 until the conclusion of NAB investigations.
A source says ECC had submitted the following proposals to the ECC: Firstly, the government may withhold payments to all IPPs that have signed agreements pursuant to the MoUs, under the Power Policy 2002 until the conclusion of NAB investigations. According to sources, the ECC opted to defer the summary because of a lack of time.
The government has already made payment of Rs 89.2 billion to Independent Power Producers (IPPs) excluding those under Power Policy 2002. Earlier, the government has assured Independent Power Producers (IPPs) in Pakistan to release payment.
I am pleased to inform that the first payment transaction, approved by the Government of 40% to 20 IPPs amounting to Rs 89.2 bln have been completed in coordination with SBP and Power Division.
This shows our commitment to resolve this longstanding issue on a permanent basis.
— Tabish Gauhar (@TabishGauharPK) June 4, 2021
Hubco received Rs 23 billion and Kapco Rs39.6 billion.n out of total Rs 90 billion.
On March 29, 2021, the government missed the deadline to pay 40% dues to lead IPPs in Pakistan.
A quick recap of IPPs Payment
On May 05, 2021, the ECC of the Cabinet approved a summary of Power Division seeking approval of Rs89.86 billion for payment of 40% dues as the first installment to 20 plants as 1/3rd cash, 1/3rd 5-Year Sukuk, and 1/3rd 10-Year PIBs.
More Read: Cabinet approves payment of the first installment to 35 IPPs
The government will pay the remaining 60% payment in six months in the ratio, 1/3rd cash, 1/3rd 10-Year Sukuk and 1/3rd 10-Year PIBs; · This decision was subject to ratification by the Cabinet, which approved the same on May 18, 2021; · The implementation of the IPPs’ amended contracts will be effective after the payment.
In the first phase, the Power Division asked the ECC for a supplementary grant of Rs89.86 billion to pay 40% amount to two IPPs set up under pre-1994 Power Policy, six IPPs under 1994 Power Policy, and 12 IPPs under 2006 RE of the government of Pakistan.
The government on March 29 missed the deadline to pay 40% dues of Rs85 billion to 8 IPPs, including HUBCO, KAPCO, Rousch, Fauji, PakGen Power, Lalpir Power, KEL, and Saba Power.
It could not make payment because of the non-availability of a clearance certificate from the National Accountability Bureau (NAB). The government still had 70 days since March 29 to cure the default.
