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April 13, 2020

‘IPPs will not allow govt to unilaterally scratch down PPAs’

Top Story

April 13, 2020

ISLAMABAD: Khalid Mansoor, CEO Hubco and chairman of IPPAC (Independent Power Producers Advisory Council) while talking to The News has said that IPPs are ready to engage with the government for a meaningful dialogue keeping in view the scenario emerging out of COVID-19 and want to play its role to provide relief to the government, but if the government wants to unilaterally scratch down thePower Purchase Agreements, then they will not hesitate to move the London Court of International Arbitration (LCIC).

"IPPs are at the brink of default as its dues of worth Rs600 billion are still not being paid out of which some amounts are payable by the government for the last 4-5 years and some are due for the last 18-19 months. Even under the given situation when the liquidity crisis for IPPs is touching a new high, IPPs are very much there to continue to stay available for uninterrupted supply of electricity." He said that power players’ image is being tarnished through the media trial. Mansur also contested the findings of the report of the committee headed by ex-SECP Chairman Mohammad Ali, arguing that IPPs being the biggest stakeholders were not consulted in preparing the report or its contents. The allegations being leveled on the IPPs are ill-conceived, unfounded, baseless and disappointing, which is causing serious damage to their reputation.

"We are ready for punishment under the law of the land if any IPP is found breaching the power policy and power purchase agreement (PPA) supported by sovereign guarantees of Government of Pakistan." If someone has not violated the law or contracts, but has managed to do better than expected because of their management expertise, cost cutting, reinvestment, or just change of each rate environment, don’t treat them as a criminal, sources at some of the business houses said. There are others who have done worse than expected.

Khalid Mansoor said: "We are ready to fight our case at every level, but we are being maligned and vilified." He said Pakistan is a high risk country and it ranks at number two after Iraq, then followed by Eygpt, Turkey, Bangladesh, India, China, UAE and US. But our competing economies, he said, such as Bangladesh and India are less risk countries in terms of investment and this is why the investors do not prefer Pakistan. More importantly in the case of India and Bangladesh, the successive governments always honour the commercial agreements but in Pakistan the situation is otherwise.

Khalid Mansoor further said there is an impression that investors in the power sector are making illegal, windfall profits and if that is the case then why those who invested under the 1994 power policy have not invested more under 2002 power policy and why those who invested under the 2002 power policy are not part of those invested under 2013 power policy and why those who invested under 2013 power policy are no more part of those who installed IPPs under the 2015 power policy.

When asked as to why there is an impression that IPPs are hesitant in getting the heat rate audits of their plants, Mansoor said the IPPs representatives offered to get heat rates audited twice to Nawaz government in the presence of the-then Finance Minister Ishaq Dar making it conditional that after the audit, the government will treat IPPs based on actual basis heat rates, but the CPPA officials refused the proposal saying it will incur loss to CPPAs in toto.

News Desk adds: In response to the recent reports appearing in the media on the inquiry committee’s report over alleged losses in the power sector, the Independent Power Producers Advisory Council (IPPAC) categorically rejects the allegations being attributed to such report. The reports appearing in the media make unsubtantiated allegations against the Independent Power Producers (IPPs), accusing them of having unfair agreements, and misappropriation in tariff and fuel consumption rates.

Neither the IPPAC nor any IPP was consulted or approached in preparing the report or its contents. The allegations being levelled on the IPPs are ill-conceived, unfounded, baseless and disappointing, which is causing serious damage to our reputation.

The IPPs have given their sweat and blood for the development of Pakistan at a time when no one was willing to invest in the country. The IPPs have empowered an uncertain economy, which had not witnessed such a sizeable quantum of Foreign Direct Investment ever in the past.

It is important to highlight that while the government has not paid the IPPs for years, and IPPs are at the brink of default being owed an amount of approximately Rs600 billion, they still continue to remain available to provide uninterrupted supply of electricity for the country, always keeping the greater national interest at the forefront.

Previously, nine IPPs had already given a lot of relaxations to the government in the form of a settlement agreement, keeping in mind the national interest. Yet it was the government that has been unable to obtain formal approval(s) to implement the same; hence that opportunity has been lost. The Settlement Agreement was consented to by such IPPs that had won the Arbitral Award by the London Court of International Arbitration (LCIA) in 2017 for the recovery of unpaid capacity payments, which had been deducted in contravention of legally valid and binding Power Purchase Agreements

It is important to remember that similar witch-hunting exercises in the past have caused immense damage to the investment climate and economic prospects of the country, and if we do not learn from the past mistakes, it will again lead to the same negative results. The IPPs have always remained available to engage in a meaningful dialogue with the government to discuss and find an amicable solution to the most pressing needs of the country. In the prevalent conditions, given the COVID-19 pandemic, the IPPAC and IPPs stand ready to do their part to help the Pakistan economy and nation during this time of need, in addition to providing uninterrupted power supply. IPPAC is issuing this clarification reserving all its rights and entitlements under the law.