Revised power tariff: All 47 IPPs sign Master Agreements

ISLAMABAD: In a major breakthrough, all the 47 independent power producers, who had signed MOUs in August 2020 paving way for discounted tariff of Rs836 billion in the next 10-12 years, have now initialed legally-binding Master Agreements.

The process got completed when the last batch of six IPPs, seeking resolution of the issue of excess profit of Rs53 billion through local arbitration tribunal, also initialed the Master Agreements on Monday night, a senior official privy to the development told The News. "Now the ECC and Federal Cabinet will approve the new power purchase agreements (PPAs) after IPPs get nod from their board of directors (BODs) within 3-4 days and in all likelihood the formal signing of amended PPAs will start from next week."

The six IPPs signed the Master Agreements after written assurance from the government that the alleged Rs53 billion excess profit made by them, mentioned in the Mohammad Ali report, would be resolved by the local arbitration tribunal within five months. The IPPs will nominate one SC judge and the government will also choose its SC judge and then the two will nominate the third neutral judge.

Among the six IPPs facing allegations of generating excessive profits, Attock Gen allegedly earned illegal profit of Rs12 billion, Nishat Power Rs7.5 billion, Nishat Chunian Rs9 billion, Liberty Power Rs10 billion, and Uch Power Rs5 billion. They argue that they didn’t mint any excess profits as their tariffs were worked out by NEPRA as per PPA and the power policy under which the IPPs were set up. The official said that the MOUs signed on August 12-13-14 would expire on February 12, 2021. "Before the deadline is over, the amended PPAs will be formally signed and that would govern the power generation of 7,450 MW."

The official statement says that the government negotiation teams and remaining six IPPs, including HUBCO (second largest IPP having capacity of 1,250 MW) and five IPPs of 2002 and 1994 Power policy, have also agreed to the terms of the legally-binding Master Agreement.

This is a milestone achievement for the government as all the 47 IPPs are on board. The formal signatures will be done between government officials and IPPs after approval of the federal cabinet and approval of respective boards of the IPPs. To a question, the official said that both the parties have also agreed that the IPPs' dues worth Rs450 billion would be paid in two installments.

The first installment of 40% (Rs180 billion) will be doled out at the time of signing of altered PPAs. The amount of Rs180 billion includes one-third in cash, one-third in form of 5-year Sukuk bonds and one third in the form of 10-year PIB (Pakistan Investment Bond). The Rs180 billion will be cleared in one month’s time. And the second installment of 60% (Rs 270 billion) will be paid after six months by August or September this year. The Rs270 bn will be given in the form of one-third in cash, one-third 5-year Sukuk bonds and one-third as 10-year PIB.

When contacted, CEO of one of six IPPs confirmed the development saying that they have also initialed the Master Agreements. He said that in the MOU signed in August 2020, the IPPs had agreed to Nepra reviewing the alleged excess profits under the condition that they retain their right of going for international arbitration in case of unfair decision. The government wanted to avoid international arbitration in view of losing a number of cases including the Reko Diq, and recently against Broadsheet. He also said that the compromise was reached on late Monday night to refer the issue to an arbitration tribunal consisting of two Supreme Court judges and a third member to be appointed by them. This is a fair and the best possible resolution of the issue paving way for final agreements which will result in substantial savings in capacity charges to the government and ultimately to the consumers.