Issue of Rs53 bn excess profits made by six IPPs: Govt may now form local arbitration court to solve row with IPPs

ISLAMABAD: The government is currently weighing option to form local arbitration court, based on three local judges of the Supreme Court to resolve the issue of excess profits of Rs53 billion, allegedly minted by 6 important IPPs and the Attorney General of Pakistan (AGP) will update the Federal Cabinet to this effect.

‘And if the Federal Cabinet, that meets tomorrow (Tuesday), gives go-ahead, then the process to constitute the local arbitration court will be expedited,’ a senior official privy to the development told The News.

“In addition, Power Division will also update the cabinet informing that 41 IPPs, out of 47 that signed MoUs in August 2020, have so far initialed the Master Agreements.”

He, however, said that the MoUs life would expire by February 12, 2021 hoping that many of 41 IPPs, which have initialed ‘Master Agreements’ legally binding contracts, would be able to formally sign the amended PPAs (Power Purchase Agreements) after getting nods from their board of directors (BoDs) and for the left out IPPs, the government will seek more time of one month at least to sign the altered PPAs.

“However, 6 IPPs out of 47 seeking resolution of excess profits will sign the revised PPAs after the decision through local arbitration.”

Explaining about the local arbitration proposal, the official said one judge either serving or retired will be nominated by the government side and another one by IPPs and then two judges will nominate the third one and this is how local experts’ panel for arbitration on the issue of excess profits will be constituted.

Earlier, the government had backed out of its commitment to constitute the experts penal, having two local judges and one judge from abroad, arguing forming experts’ panel is a sheer breach of MoUs, signed in August 2020.

The government had also pleaded, saying there is no mention in MoUs that excess profits issue will be resolved through experts’ panel rather it is mentioned it will be resolved through Nepra.

Now under the latest scenario, the government side has taken another U turn, arguing in case as per MoUs, Nepra decides the excess profit issue in favour of the government then IPPs will move the local courts and then international arbitration.

And the record of winning cases by the government through international arbitration court is not good, which is why the government is seriously thinking to adopt the new offer of local arbitration, made by IPPs to resolve the issue once and for all. Interestingly, the official said, the formation of local arbitration is also tantamount to violation of MoUs, which may also be termed as NRO to 6 IPPs.

However, IPPs contented that after the government had earlier walked away from making the experts panel, comprising two local judges and one from abroad, they offered to the government for local arbitration based on three local judges. They said that they had been blamed for making extra illegal profit and declared the dacoits in the Mohammad Ali report, which is highly objectionable.

“IPPs maintained that they volunteered and signed the MoUs for discounted tariffs to bailout the government and to cope with the increasing circular debt to make the power sector sustainable, but still there are some elements at the helm of affairs who want to sabotage the whole exercise. And which is why they in their last ditch effort asked for local arbitration.”

Six IPPs are also of the view that since Nepra is also a party to the dispute in the court of law on the same subject of excess payments, they do not want Nepra to decide this very issue of excess profits.