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January 16, 2021

Tabish Gauhar on the saddle with more powers: IPPs, govt panel set to initial amended PPAs next week

National

January 16, 2021

ISLAMABAD: With more powers to Special Assistant to PM on Power, Tabish Gauhar, the negotiations with the IPPs with regard to converting MoUs into the amended Power Purchase Agreements (PPAs) seemed to have moved towards conclusion.

“The IPPs and government negotiating team are set to initialise the amended PPAs, sometime in next week, however, the proper signing would be held when the BoDs of IPPs ratify them and the Federal Cabinet would also approve the initials done by the government’s team,” one of top officials at the Petroleum Division told The News. “Now there will be no role in negotiations with IPPs and power sector affairs from SAPM on Petroleum Nadeem Babar as under new orders from the PM’s office, Tabish Gauhar would take the lead."

Nadeem Babar, who owned majority shares in Orient Power (Thermal Power Plants) and Oursun (Solar Plant), was earlier heavily involved in talks with the IPPs, which irritated Tabish the most. So the SAPM on Power had decided to tender his resignation, however, the prime minister did not accept his resignation and asked Tabish to continue his services with more authority and there would be no interference from Nadeem Babar, SAPM on Petroleum.

Under the new scenario, the SAPM on Power and Secretary Power Division along with MoUs Implementation Committee were hectically engaged with the IPPs and both sides were inclined to initialise the agreements, sometime in next week.

Afterwards, the formal signing would take place once the BoDs of the IPPs installed under 1994, 2002 power policies, including HUBCO and KAPCO, would give go ahead and the federal government accorded approval to the initials done by the government committee.

To a question, the SAPM on Power said the formal signing would be done with the IPPs well before the deadline of February 12, 2021 and at present there is no thinking in the government n negotiating committee and the Power Division to seek an extension from IPPs in the time limit of MoUs that would expire on February 12, 2021. The official said there was no alteration being done in the MoUs signed by 47 IPPs and the government committee in August 2020, paving way for benefit of Rs836 billion in the next 10-12 years. He said the MoUs have been approved by the federal government, which could not be altered by anyone.

However, Gauhar said six IPPs, led by Mansha Group, and the Attorney General Office (AGO) have currently been engaged to constitute the experts panel. The expert panel would be mandated to resolve the issue of alleged excess payment of Rs53 billion within six months. He mentioned that it was written in the MoUs that the amount of Rs53 billion was branded as excess payment that was illegally minted by some IPPs and Nepra would carry out the due diligence if IPPs have pocketed excess amounts.

“The seeking of resolution of Rs53 billion disputed amount from the experts panel instead of NEPRA can be technically termed to somewhat extent as deviation from the MoUs but partially it is not a deviation.” Since the IPPs had no trust in the NEPRA, which was asked by the government to carry out due diligence about the excess payments of Rs53 billion, the IPPs argued that NEPRA is already a party to dispute on this particular issue in the court of law. And they were also of the view that under the PPA, the NEPRA is not the forum to resolve such financial disputes, rather arbitration court is the forum to decide such issues and there is also the provision that prior to moving arbitration court, an expert panel can decide such issues. “So the government has agreed to the IPPs or the constitution of experts’ panel to decide the issue in six months time, which will be acceptable to the IPPs.”

Under the MoUs signed, the government has managed to introduce, with consent of IPPs, material changes in the existing PPAs that will yield reasonable dividends amounting to Rs836 billion in the next 10-12 years.

The main clause of the agreement of 15 percent profit plus dollar offered to the IPPs under the previous power policies have been changed to 17 percent rate of return with Pak Rupee indexation. And the IPPs will be paid the profit as per value of dollar at Rs148. However, the rate of return of foreign-funded IPPs has been reduced from 15 percent to 12 percent with US dollar indexation.

As per the MoUs, the agreements based on take or pay mode will be converted into those based on take and pay only when the competitive market system, having multi-buyers of electricity being generated by the IPPs, is established and becomes operational. However, for oil fired power houses, any saving in fuel will be shared with the government also. But all is possible, the official said, only when MoUs are converted into formal legal amended agreements. The IPPs, under the MoUs, had set the condition that they would only sign the amended agreements when their dues got cleared.

On the issue of payment mechanism of dues amounting to Rs453 billion to the IPPs, he said the IPPs wanted the government to clear the whole dues in six months time by paying 50 percent in the shape of cash on the occasion of formal signing ceremony of amended PPAs (Master Agreements) and the remaining amount should be paid in trade bonds after six months.

The government wants to offload the dues in one year's time by paying one third in the shape of cash at the time of formal signing and others two in installments in the shape of the PIBs or tradable bonds each after every six months. “Out of Rs453 billion, the amount of Rs53 billion is disputed one which will be settled by experts’ panel.”