ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has officially accepted a joint application for tariff reduction under the hybrid take-and-pay mechanism, filed by seven Independent Power Producers (IPPs). These IPPs were established under the Power Generation Policy of 2002 and the Central Power Purchasing Agency–Guaranteed (CPPA-G).
The seven IPPs that have jointly submitted the tariff reduction request, in accordance with agreements with the Government’s Task Force, are as follows:
- Nishat Chunian Power Limited
- Nishat Power Limited
- Narowal Energy Limited
- Liberty Power Tech Limited
- Engro Powergen Qadirpur Limited
- Saphire Electric Power Limited
- Saif Power Limited
The Task Force, which is led by the Minister for Power, Sardar Awais Khan Leghari, and includes 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, has been engaged with the IPPs of the 1994 and 2002 agreements.
Key Aspects of the Tariff Adjustment:
- The Amendment Agreement will be effective from November 01, 2024, with changes in the indexation mechanism for Operation and Maintenance (O&M).
- The tariff for working capital costs and O&M will be rebased.
- Return on equity will be paid under a hybrid take-and-pay mode.
- Insurance premium for the tariff is capped at 0.9% of the Engineering, Procurement, and Construction (EPC) cost.
- The company will share profits until FY’23, which will be adjusted against receivables from CPPA.
- The Government of Pakistan (GoP) will unconditionally withdraw arbitration under the Arbitration Submission Agreements.
- The undertaking by the company to retain receivables until the conclusion of arbitration will be returned.
- Outstanding receivables as of October 31, 2024, will be settled within 90 days of the Cabinet’s approval of the agreement.
- The waiver of delay payments will apply until October 31, 2024.
- The LCIA Arbitration clause in the Power Purchase Agreement (PPA) will be replaced with local arbitration laws, with the arbitration seated in Islamabad.
The government has claimed to have saved approximately Rs 1.4 trillion through negotiated agreements for the remaining life of these projects. 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 “forced” agreement and leveled serious accusations against the government regarding mistreatment.
In response, the government has directed Nepra to conduct a forensic audit of Halmore’s power plant, which is owned by a British national. Nepra has requested comments from all stakeholders, affected parties, and the general public. A public hearing on this matter is scheduled for March 24, 2025.
