Agreements with 30 out of 47 IPPs signed, govt tells Nepra

ISLAMABAD- mThe National Electric Power Regulatory Authority was Wednesday informed by the government that agreements with 30 out of 47 IPPs have been signed as the regulator conducted public hearing on revised tariff for the IPPs.

The public hearing, presided over by Chairman NEPRA Tauseef H Farooqi, was informed by Waseem Mukhtar, the Chief Executive Officer of the Central Power Purchasing Agency (Guarantee) Limited, that negotiations for the final agreements with the remaining 17 IPPs, with whom MoUs have been signed, are in the process.  The power regulator has questioned the determination of indexation in agreements signed with independent power producers (IPPs).

The CPPA has submitted an application with NEPRA for adjustment in components of tariff pursuant to agreements entered between power purchaser and independent power producers (IPPs).The NEPRA has conducted separate hearing for 12 thermal, three wind, solar and baggase IPPs.

The hearing was informed that the saving from 12 thermal IPPs will be around Rs 182 billion, from 17 wind power plant Rs 191 billion will be saved, from baggase Rs 142 billion and from solar IPPs the saving of Rs 3 billion will come. It was informed that there are total 7 baggase power plants in the country with the total generation of 196 MW. Out of the total 17 wind power plants agreements have been signed with three and negotiations with the remaining 14 IPPs are underway. A total of 47 IPPs have signed MoUs with the government and out of it, final agreements have been signed with 30 power companies.

With the overall financial advantage of Rs. 836 billion savings, the revised deal will result in reducing the circular debt. The average reduction will be Re 0.25 per unit, which will increase to Rs 0.40 per unit in 2027. However, officials did not indicate that any relief would be provided directly to consumers at their rates.

The CPPA-G representative said that initially the government and the IPPs had agreed to freeze the dollar at Rs 168, which was reduced to Rs 148 in the final agreement. Losses will not be passed on to consumers and only savings will be shared with them.

NEPRA Chairman Tauseef H. Farooqi was of the view that the “actual performance” of CPPA-G would be considered after the dollar crosses Rs168.

Chief Financial Officer (CFO) CPPA-G, Rehman Akhtar,said it was a success for the government in both ways, adding that the agreement at the current rate was also a win-win situation for CPPA-G. “We also tried to persuade IPPs to pay Rs 160 / – instead of Rs 168 / -. The current arrangement is also beneficial for consumers and if the dollar rises above Rs168, then it will be a win-win situation for consumers.”

Rehman endorsed the NEPRA chairman’s view that if the dollar rate exceeds Rs. 168, consumers will benefit more but it is still viable and beneficial for consumers.

The chairman NEPRA asked the CPPA-G official whether they had analyzed the benefit in case the dollar was valued at Rs 170, Rs 175 or more than Rs 200. To this CFO CPPA-G replied that their analysis is based on 5% annual depreciation. 

However, if the dollar stays at the agreed rate of Rs 148, it will be beneficial for the government in the case of foreign lenders but not in the case of local lenders.

CPPA-G requested that in case of foreign equity investment, the existing RoE and RoEDC components of 15% return should be replaced with 15% return with dollar index and fixed exchange at 14%. In case of 17% local equity investment with rate, no further index is required. 

The Authority has stated that the first installment of 40 per cent of the agreed amount will be paid to the power projects after notification of their rates, while the second installment of 60 per cent of the agreed amount will be paid in the next six months. After the implementation of the agreements, the profit of IPPs will be reduced to some extent. NEPRA has completed hearing and has reserved the judgment.

Article source: https://nation.com.pk/04-Mar-2021/agreements-with-30-out-of-47-ipps-signed-govt-tells-nepra