Pakistan to Save Rs 920B After IPP Deal Revisions
Staff Report:
Pakistan to make savings of Rs 920 billion due to revision in agreements with Independent Power Producers (IPPs).
However, the consumers will receive a cut in electricity rates up to Rs 0.50 per unit following revision in agreements with seven Independent Power Plants (IPPs).
The power division officials informed that total savings had been estimated at Rs 920 billion over the entire life of IPPs in private sector.Tripping of Grid Stations Causes Load shedding in Winter
This savings is on account of capacity payments to IPPs that is very low compared to annual capacity payments to IPPs that amount to Rs 2.5 to Rs 2.8 trillion.
During the public hearing for the revised tariff, the National Electric Power Regulatory Authority (Nepra) was informed that consumers will enjoy a relief of Rs 0.50 per unit following revision in agreements with seven IPPs.
The government has signed revised agreements with seven IPPs which included Nishat Power Limited, Nishat Chunian Power, Saif Power, Sapphire Electric, Engro Power, norwal Energy and Liberty Power Tech Limited.
The national electric power regulatory authority (Nepra) conducted a public hearing here on Monday to consider revised tariff in line with revision in agreements between government and IPPs.
During the hearing, the question was raised that IPPs were screwed up to revised tariff deal.
However, power division officials ruled out such allegations and said that these seven IPPs had voluntarily agreed to revised agreements without bearing any pressure.
They said that those IPPs like Orient had not agreed and therefore they were not part of the petition relating to revised tariff.
However, they said that government was in talks with all those IPPs to negotiate a deal which were reluctant to revise agreements.
They further said that government had signed agreements with 29 IPPs which had agreed to revise tariff.
Regarding impact of tariff on consumers, government officials said that tariff would be reduced up to Rs 0.50 per unit for seven IPPs.
They said that tariff reduction related to sale volume of electricity. If there is low sale volume this impact would be wiped out and there would be higher reduction in case of sale volumes increased.
The intervenors also raised questions over fixing the price of furnace oil at Rs 165000 per ton.
They said that there was no consumption of furnace in Pakistan and therefore oil refineries had exported one million tons furnace oil so far.
They also opposed the fixing price of furnace oil.
However, the government officials said that there reduction in price of furnace would be passed on to the consumers. The fluctuation had been linked with kibor rate that was earlier 4.5 percent and had been reduced now to kibor plus 1 percent.
The intevenors also raised question of passing on relief to the consumers.
They said that there were reports that IMF had refused to allow government to pass on relief to the consumers following revision in agreements with IPPs.
As many as seven power companies have waived off Late Payment Surcharge worth Rs 11.19 billion. Nishat Power Limited has waived off Rs 1.77 billion, Nishat Chunian Power Rs 1.84 billion, Saif Power Rs 1.6 billion, Sapphire Electric Rs 1.39 billion. Engro Power Rs 1.7 billion, norwal Energy Rs 1.5 billion and Liberty Power Tech Limited Rs 1.35 billion.
These IPPs have been facing action of excess savings and Nepra had issued notices to them that were challenged in court. This settlement has been resolved now and nepra will withdraw notices under a deal between government and IPPs.
The government will recover past excess profits up to 2023 from these IPPs.
According to application, the O&M components of NCPL and LPTL shall be revised as per the Amendment Agreement. For the remaining IPPs, NEP-approved O&M for the quarter ended September 30, 2024, shall continue.
Indexation shall be the lower of 5% per annum, or the average NCPI for the preceding 12 months.Indexation shall follow the existing mechanism, provided that PKR/USD depreciation shall be allowed only up to 70% of actual depreciation per annum. As many as 100% appreciation shall be passed on to the consumers.
Regarding, O&M Components, for Foreign Cost of Working Capital, there will be 7 days inventory at 100% load factor (RFO) and 15 days receivables at 15% load factor (Gas).
RFO price has been set at Rs. 165,000/Ton, excluding Sales Tax. Sales Tax, currently included in the existing CWC component, shall be removed. The spread over KIBOR on CWC has been revised from 2% to 1%. The revised CWC in the future shall be indexed at KIBOR + 1%. The maximum limit of the insurance component shall be capped at 0.9% of the allowed EPC Cost.
