Kapco denies receiving capacity payments

KARACHI: Amid ongoing discussions about capacity payments to independent power producers(IPPs), Kot Addu Power Company Limited (Kapco) has denied claims that it is receiving payments without generating electricity.

Kapco stated that it has not received any capacity payments from the power purchaser since the Power Purchase Agreement (PPA) ended on October 24, 2022, according to a notice sent to the Pakistan Stock Exchange on Wednesday.

However, the company acknowledged receiving payments for overdue receivables from the power purchaser for the period up to the PPA’s expiration, and these payments have been accurately reflected in the company’s financial statements.

The company explained that it entered into various agreements, including the PPA, in June 1996 during its privatization by the Privatization Commission, Government of Pakistan. “The PPA had a 25-year term, which was scheduled to end in June 2021,” it said.

It was noted that under the terms of the third amendment to the PPA and Master Agreement, a dispute over liquidated damages with the power purchaser was resolved, leading to an extension of the PPA by 485 days (approximately 16 months) until October 24, 2022.

“During this extended period of 485 days, the company did not charge for capacity payments but was required to keep its power plant available for generation,” the company added.Kapco revealed that since the PPA’s expiration on October 24, 2022, and in the absence of an active operating regime, the power plant has been in preservation mode.

The company also mentioned that its tariff application is still awaiting a final decision from the

National Electric Power Regulatory Authority (Nepra).Kapco also highlighted that its 220KV-132KV switchyard facility is being provided to the power purchaser upon special request from the ministry, without compensation, since the PPA expired.Kapco operates Pakistan’s largest combined cycle power plant, which includes 10 multi-fuel gas turbines and five steam turbines.