Govt to clear dues of 53 IPPs in shape of promissory notes

ISLAMABAD: The State Bank of Pakistan will issue promissory notes to every IPP (Independent Power Producer) under a payment mechanism in two or three installments. The government of Pakistan has to pay the dues of 53 IPPs, which stand at about Rs 450 billion prior to turning MoUs into amended power purchase agreements (PPAs).

“So far 47 IPPs have signed MoUs and six leftover IPPs will sign MoUs within a short span of time as talks with them have begun. The monetary impact of MoUs with IPPs has been estimated at Rs 836 billion in the remaining period of their PPA that stands at 10-12 years. Talks are under way with 47 IPPs for finalizing Master Agreements for altered PPAs and they have also been shared with the templates to this effect,” a senior official who is part of ongoing talks with IPPs confided to The News.

The government wants to pay dues of IPPs either in two or three years but in the shape of promissory notes and hopefully 53 IPPs which were installed under 1994, 2002 and 2006 power policies will accept the government payment mechanism, the official said, adding that the government will seek some relief from IPPs under the head of late payment surcharge (LPS) and ask them to neutralize the remaining amount under the LPS head against the payment which IPPs have to pay to PSO, OGDCL and other government entities under the same head.

“We hope that out of Rs450 billion dues of IPPs, Rs150 billion will be neutralized. So the net amount that the government has to pay will stand somewhere at Rs 300 billion. Against the amount of Rs 300 billion, the Pakistan State Bank will issue to IPPs the promissory notes,” the official said.

A promissory note is a financial instrument that includes a written promise from the issuer to pay a second party – the payee – a specific sum of money, either on a specific future date or whenever the payee demands payment (depending on the terms of the note). The whole talks process with IPPs that has started for finalizing the payment mechanism and five master agreements that will lead to signing of the amended PPAs will end by mid-December 2020 and after that the lenders of IPPs and their board of directors will approve the amended PPAs and accordingly the NEPRA will receive a petition from every IPP and decide everyone’s tariff accordingly. “We are trying to meet the deadline of February 12, 2021, but the government will seek more time from IPPs in case the 6 months time has elapsed,” the official said.

It is pertinent to mention here that IPPs signed MoUs with the government on August 13, 2020 with their validity of six months that is to expire on February 12, 2021. Once the deadline is over, MoUs will not be binding on IPPs. However, the top government official said the government will manage this issue and hopefully all will be done in January 2021 and if in any case, it fails to get all required prerequisites required to make amended PPAs operational by February 12, 2021, it will manage more time from IPPs. From next Monday, IPPs along with their counsel will also start taking part in negotiations to finalize the Five Master Agreements which will lead to amended PPAs.