ISLAMABAD: The Energy Task Force has started negotiations with the Independent Power Producers (IPPs) of Power Policy 2002 and summoned the management of Sapphire Power Plant on Monday(today) , out of ten IPPs, which are being ‘forced’ to switch from a take-or-pay mode to a new take-and-pay model. This move aims to reduce capacity payments, which currently total around Rs 2.3 trillion.
Well-informed sources told NewzShewz that out of 18 IPPs identified for this conversion, a few are being exempted for various reasons. Some IPPs have already consented to contract revisions in the “best national interest,” though further details were not disclosed.
Muhammad Ali, Special Assistant to the Prime Minister on Power and co-chair of the Energy Task Force, confirmed that discussions with the 18 IPPs will begin today. These negotiations are expected to conclude this week, after which the revised agreements will be presented to the Cabinet for approval. Lt. General, Muhammad Zafar Iqbal is the key man who sits during negotiations with the IPPs.
Meanwhile, unconfirmed reports suggest that nearly a dozen IPPs are planning to approach Prime Minister Shehbaz Sharif to discuss their challenges and the impact of the current situation on future investment.
Sources indicate that the top executives of these IPPs intend to propose pre-conditions for either terminating or converting their contracts from take-or-pay to take-and-pay mode.
Key IPPs involved in the new agreement include Pakgen Power, Nishat Power, Nishat Chunian, Sapphire, Hubco Narowal, Kohinoor Energy, Liberty FSD, Halmore, Laraib, and Orient Power.
These IPPs believe that eliminating the entire capacity payment of the 2002 IPPs (2400 MW) would only marginally affect the generation tariff of the ten IPPs established under the 2002 Power Policy. They are prepared to terminate their sovereign contracts, contingent upon the following conditions: (i) all past due amounts must be paid at termination, either in cash or T-Bills; (ii) all “Take or Pay” contracts should be terminated to eliminate capacity payments, regardless of ownership; (iii) generators must be allowed to sell their power to private buyers using the existing transmission and distribution system at a reasonable cost, with no obligation for the government to purchase; and (iv) SNGPL must continue supplying LNG to IPPs operating on this fuel until private imports are permitted, as LNG supply remains a government monopoly.
Frustrated with their treatment by the government, IPPs argue that this marks the fourth time their sovereign power contracts have been forcibly renegotiated or terminated. They warn that such actions could cause irreversible damage to the privatization process. The IPPs assert that any meaningful reduction in consumer tariffs can only result from (i) increased power sales, (ii) long-overdue reforms in the T&D system, and (iii) a reduction in the heavy tax burden. They contend that policymakers are focused on short-term gains, neglecting the significant damage to investor confidence—both local and foreign—and delaying necessary reforms to make the sector viable.
Earlier, the government terminated contracts with five IPPs, resulting in a payment of Rs 76 billion and projected savings of Rs 410 billion over the remaining life of those power projects. The Energy Task Force also signed revised arrangements with eight bagasse IPPs aimed at reducing their tariff by Rs 1 per unit, from Rs 12.4788 per unit.Ends
