ISLAMABAD: The government has decided to seek an update from the NAB on its ongoing investigation against some of the IPPs set up under the 2002 power policy over alleged excess profits and if the anti-graft body clears them, then it will also start paying 40 percent of their dues to them as first installment.
The ECC in its last meeting held on May 05, 2021 approved Rs89.86 billion to pay 40 percent as the first installment to 35 IPPs set up pre and under 1994, 2006 power policies, but it decided not to pay 12 IPPs installed under the 2002 power policy; rather it decided that Finance Minister Shaukat Tarin will seek an update from the NAB on the investigation it initiated against some of the unscrupulous power plants for allegedly minting excess profit.
According to inside sources, some of the entrepreneurs of 12 IPPs have been assured that the anti-graft body will be asked to provide the update on its investigation, so that the government could take the decision to either release their 40 percent of dues or hold it till clearance by the anti-graft body.
Under the agreement, the government has to pay the total dues of Rs403 billion to 47 IPPs in two installments, 40 percent as first installment and 60 percent in the next six months.
So as soon as the first 40 percent of the dues are paid, the amended power purchase agreement with discounted tariff will be effective. However, the government has so far managed to approve Rs89.86 billion for 35 IPPs out of 47, but the fate of payment of dues to 12 IPPs set up under the 2002 power policy is uncertain.
The affected 12 IPPs have sent a letter to the Power Division, urging the government to pay 40 percent of their dues with immediate effect and any failure in this regard will result in default of the power purchaser under the agreement. The IPPs also said that they reserved all the rights under the agreement, the PPA (as amended) and the applicable law.
The letter states that the IPPs had entered into a Power Purchase Agreement (PPA) with the Power Purchaser (CPPA-G), pursuant to which the power purchaser was required to make payments to the IPPs as per the tariff determined by the National Electric Power Regulatory Authority (Nepra).
Despite being under an obligation to make timely payments to the IPPs under the PPA, the power purchaser has been in “consistent payment defaults” in the past. This also led to multiple disputes between the parties under the PPA, which were resolved by the parties in LCIA arbitrations seated in London.
The IPPs have always been successful in those proceedings and arbitral awards were issued in its favour. The power purchaser remains in default with respect to its payment obligations arising out of arbitral awards as well as other undisputed amounts under the PPA.
Instead of fulfilling the promises made to the IPPs, according to the letter, various state agencies initiated unnecessary and unlawful proceedings against a few IPPs on various grounds. For example, notices have been issued with respect to earning allegedly excessive profits. The IPPs, through the letter, reminded the government saying: “All such actions by the state agencies have always been resisted.”
And with respect to these matters, the IPPs have always taken a stance that any such dispute or allegation is to be resolved through LCIA arbitration only in terms of the Implementation Agreement (IA).
