MoUs signed with IPPs will help save over Rs800b

ISLAMABAD: The Cabinet Committee on Energy (CCoE) with Federal Minister for Planning and Special Initiatives Asad Umar here on Thursday was told that MoUs signed with IPPs will help save over Rs800 billion in the remaining period of PPAs (Power Purchase Agreements) and in first three year about Rs60 billion will be saved meaning by that every year over Rs20 billion will be saved.

The remaining period of PPAs of IPPs installed under 1994 power policy stands at 3-4 years whereas the remaining period of PPAs of IPPs setup under 2002 power policy stand at 10-12 years.

This has been told by the Chairman of the Committee Babar Yaqoob Fateh Muhammad who presented its findings, highlights of the MoUs reached with the IPPs and its recommendations to the CCoE, a senior official who was part of the meeting told The News.

In first three years time the further appreciation of US dollar will be in range of 5-6 percent which is why the savings have been estimated at Rs60 billion meaning by that savings will be at Rs20 billion per year in first three years and in the remaining period of PPAs the impact of dollar’s appreciation will increase owing to which the saving will be on higher side and will end up of over Rs800 billion.

However when it comes to agreements with state owned power houses (GENCOs) and government owned hydropower power projects, under which their profits will be reduced to 10 percent, CCoE was told that Rs100 billion will be saved in the first three years. And if these are combined with the impacts of MoUs signed with IPPs, the total savings of Rs160 billion (Rs60 billion saving from IPPs and Rs100 billion from GENCOs from state owned hydro power projects) will be made in first three years meaning by that country will be having saving of over Rs53 billion per years. The expected savings will not be passed on to end consumers rather these gains will be used to reduce the circular debt which stands at Rs2.25 trillion.

In the meeting, CCoE was also sensitised that as of now the government owes to pay Rs400 billion to IPPs. And to this effect a plan for payments to IPPs will be carved out with timelines. When asked as to how and from which resources the government will pay the arrears of Rs400 billion to IPPs, he said that the Finance Division will make the payment plan with the consultation of IPPs. However, the government will not pay the huge amount of Rs400 billion in one go rather it will pay it to IPPs in phases.

However, he said that IPPs demanded that the payment should be made in one go or pay at least 80-90 percent in the first installment adding that it is not doable as the government right now has not enough liquidity to pay the dues of IPPs in one go.

To a question he said that the inefficient state owned power projects of 1500 MW will be closed down by December this year and some will be shut down in next year 2021 and the remaining will be made non-operational in 2022 and this is how the total inefficient GENCOs of 4000MW will be closed down in three years time and only efficient state owned power projects will continue to operate.