ISLAMABAD: The Energy Task Force, headed by the Minister for Power, Sardar Awais Leghari has inked revised deals with eight bagasse –fired IPPs including owned by the Prime Minister’s sons, total saving on revised agreements is envisaged to be about 100 billion over the life of projects which also includes reduction in payment of Rs 7- 8 billion from Rs 22 billion approved by NEPRA through upward revision in their tariffs with retrospective effect .
Sources told NewzShewz that the sugar mills which have signed revised agreements include Hamza Sugar Mills, Chiniot Sugar Mills, JWD-II, JWD-III, Rahimyar Khan Mills, Chenab Sugar Mills, Al-Moiz sugar Mills and Thal Industries.
The settlement with baggasse-fired IPPs is considered as a big achievement of the Energy Task Force, after termination of PPAs with five IPPs through negotiated settlement, which will save over Rs 400 billion over the remaining life of these projects.
The sources said, sugar mills owners including Prime Minister’s son were invited in Rawalpindi for negotiated settlement on the basis of figures calculated by the experts of Task Force. SAPM on Power, Muhammad Ali is co-chairman and Lt. General Zafar Iqbal is National Coordinator of the Task Force.
The signed arrangement is as follows: (i) this Agreement shall become effective on 31 October 2024 (the “Effective Date”) ;(ii) for the purposes of the fuel cost component (“FCC”) of the tariff, with effect from October 1, 2021 onward, the reference price for bagasse shall be Rs. 4,500/ton, and thereafter there will be 5 % annual indexation on the applicable bagasse price for the previous year. The calorific value of bagasse for purposes of FCC calculation shall be
taken as 7000 BTU; (iii) payment of FCC for the period from October 1, 2021 onwards shall be made as per the FCC calculated in terms of sub-clause (b) ; (iv) (d) for the purposes of payment of FCC for the period from October 1, 2018 to September 30, 2021, reference bagasse price shall be determined by negative backward indexation rate of five percent (5%) on the rate of Rs. 4,500/ton, and accordingly the previous invoices shall be revised; (v) the Seller hereby agrees to reduce its Working Capital Component by 50% with effect from the Effective Date ;(vi) the Seller hereby agrees to change, with effect from the Effective Date, its Return on
Equity (“RoE”) and Return on Equity during Construction (“RoEDC”) components to seventeen percent (17%) PKR based per annum on NEPRA approved equity at CoD calculated at PKR/USD exchange rate of PKR 168/USD with no future USD indexation.
The Parties shall jointly develop a tariff adjustment application to be submitted to National Electric Power Regulatory Authority as a necessary condition to bringing into effect the aforesaid arrangements (the “Tariff Adjustment Application”).
The Purchaser shall, within five (5) days from the execution of this Agreement, file the agreed Tariff Adjustment Application with NEPRA. The revised tariff shall be effective from the date of notification (the “Revised Tariff Effective Date”) subject to the terms of this Agreement, till Revised Tariff Effective Date, the Parties agree that the Seller shall commence giving discount in its invoices consistent with the notified tariff and this Agreement (“Tariff Discounts”). From and after the Revised Tariff Effective Date, billing and invoicing shall be as per the revised tariff.
The Parties agree that paragraph (b) of Section 9.1 (Payments for Monthly Energy) of the EPA, shall stand deleted and substituted in its entirety as follows: “(b) Notwithstanding paragraph (a) above, if the Seller operates above the annual 45% plant factor (the “Average PF”) in a year, the purchaser shall pay 100% of the Variable Energy Purchase Price and 30% of the Fixed Energy Purchase Price for energy produced above 45% plant factor provided however, for every five (5) year period starting from the Commercial Operation Date (after which a fresh reset shall be done to re-start the new five year period). if the Seller operates below the Average PF in any year (“Actual Shortfall PF”), the difference between the Average PF and Actual Shortfall PF shall be carried forward to the next year(s). In case the Seller operates above the Average PF in subsequent years, the Purchaser shall pay one hundred percent (100%) of the Variable Energy Purchase Price.
On February 7, 2024, NEPRA decided to permit fuel cost adjustments from October 2018 to September 2022, following the FCC adjustment mechanism detailed in the 2013 determination. Bagasse IPPs are required to submit their requests according to this mechanism, including relevant indices such as the international coal price and bunker index for the applicable years.
The sources said, rate of baggasse has been revised down to Rs 4500 per unit from Rs 5600 per ton. The overall financial impact of 5 per cent retrospective deduction will be around 42 per cent of allowed tariff financial implications.
NEPRA, had increased fuel price component of baggasse -fired IPPs by 110% for bagasse-based generation, raising it from Rs 5.9822 per unit to Rs 12.4788 per unit by linking it to international coal prices.
CPPA-G had sought adjustment of Rs 22 billion as in fuel price adjustment retrospectively . In the first phase, the government paid Rs840.3 million to Chanar Energy, Rs1.48 billion to Chiniot Power, Rs1.42 billion to Hamza Sugar Mills, Rs4.1 billion to two units of JDW and Rs399.3 million to Rahim Yar Khan Mills, however, Almoiz and Thai Industries did not receive any payment in the first phase.
The negotiators claim that they have saved Rs 8 billion from approved Rs 22 billion as a result of revised energy fuel price price of baggasse-based IPP.
This issue had also been highlighted in discussions at the Senate Standing Committee on Power, led by Senator Mohin Aziz and during a public hearing on FCA last month. Ends
