Nepra Receives Joint Plea of Tariff Reduction From 7 IPPs

ISLAMABAD March 18: The National Electric Power Regulatory Authority (Nepra) has accepted a joint tariff reduction application from seven Independent Power Producers (IPPs) that were established under the Power Generation Policy of 2002.

These IPPs have filed the application under a hybrid take-and-pay mechanism, in alignment with agreements made with the Government’s Task Force. The companies involved in this application are:

1. Nishat Chunian Power Limited
2. Nishat Power Limited
3. Narowal Energy Limited
4. Liberty Power Tech Limited
5. Engro Powergen Qadirpur Limited
6. Sapphire Electric Power Limited
7. Saif Power Limited

The government’s Task Force, led by Minister for Power Sardar Awais Khan Leghari, includes several key figures: SAPM on Power Muhammad Ali, National Coordinator Lt General Muhammad Zafar Iqbal, Chairman Nepra, CEO CPPA-G, Managing Director PPIB, and experts from Nepra, CPPA-G, and SECP.

Read More: Cabinet Approves Eight IPPs Settlement Deals to Reduce Electricity Tariffs

This Task Force is working with IPPs of both the 1994 and 2002 Power Generation Policies to negotiate and amend tariffs.

Terms for Tariff Reduction

The following are some important terms and conditions associated with the amendment agreement:

1. Effective Date: The Amendment Agreement will be effective from November 1, 2024.
2. Indexation Mechanism: The indexation mechanism for O&M (Operations and Maintenance) costs has been revised.
3. Rebasing: The tariff for the cost of working capital and O&M has been rebased.
4. Hybrid Payment Mode: The return on equity tariff component will be paid under the hybrid take-and-pay mode.
5. Insurance Premium: The tariff for insurance premiums is capped at 0.9% of EPC cost.
6. Profit Sharing: The companies will share profits until FY 2023, which will be adjusted against receivables from CPPA.
7. Arbitration Withdrawal: The Government of Pakistan (GoP) will unconditionally withdraw arbitration under Arbitration Submission Agreements.
8. Receivables: The undertaking given by the company to retain its receivables until the conclusion of arbitration under the ASA will be returned.
9. Payment of Outstanding Receivables: Outstanding receivables as of October 31, 2024 must be paid within 90 days of the agreement’s approval by the Cabinet.
10. Waiver of Delay Payments: Delay payments will be waived until October 31, 2024.
11. Arbitration Clause Change: The LCIA Arbitration clause in the Power Purchase Agreement (PPA) will be replaced with an Islamabad-seated arbitration under local laws.

Also Read: Negotiations with IPPs Fair, Transparent: Leghari Tells IMF, WB, ADB

The government claims to have saved Rs 1.4 trillion over the remaining life of these projects due to the negotiated agreements.

In total, 16 IPPs under the 2002 Power Generation Policy have signed revised contracts with the Government of Pakistan. However, one IPP, Halmore, refused to sign the agreement, citing serious accusations of mistreatment by the government.

In response, the government has requested Nepra to conduct a forensic audit of Halmore’s power plant, which is owned by a British national.

Nepra has invited comments from stakeholders, affected parties, and the public regarding the matter. A public hearing is scheduled for March 24, 2025, to discuss the issue.