The government’s task force on energy, along with 17 Independent Power Producers (IPPs) from the Power Policies of 1994 and 2002, has reportedly reached an amicable agreement on a hybrid ‘take and pay’ model after more than two weeks of intensive discussions in Rawalpindi, Business Recorder reported.

The task force, led by Minister for Power Sardar Awais Khan Leghari, includes SAPM on Power Muhammad Ali, National Coordinator Lt. General Muhammad Zafar Iqbal, NEPRA Chairman, CEO of CPPA-G, Managing Director of PPIB, and experts from NEPRA, CPPA-G, and SECP, and has been in talks with the IPPs from 1994 and 2002.

However, the exact number of IPPs that have signed the agreement has not been confirmed by either the government or the representatives of the IPPs. Last week, the government announced that 11 out of the 17 IPPs had signed the revised contracts.

On Wednesday, when the revised agreement with the 17 IPPs was announced, a member of the task force stated, “no, no,” and promised further clarification next week.

Some IPPs have informally expressed concerns about the overreach of certain officials supporting the Task Force. The government anticipates savings of up to Rs 200-300 billion. Legal teams from both sides discussed the proposed revised draft of the Power Purchase Agreements (PPAs) and Implementation Agreements (IAs), which will require Cabinet approval before being submitted to the National Electric Power Regulatory Authority (NEPRA) for new tariff determinations.

According to the PPIB’s website, the individual capacities of the negotiating IPPs include: Uch-I Power Limited, Pakgen Power Limited, Liberty Power Daharki Ltd, Kohinoor Energy, Fauji Kabirwala Power Company Limited, Attock Gen Limited, Engro Power Gen Qadirpur Limited, Foundation Power, Halmore Power Generation Company, Liberty Power Tech Limited, Hubco Narowal Energy Tech Limited, Nishat Chunian Power Limited, Nishat Power Limited, Orient Power Company, Saif Power Limited, Sapphire Power Limited, Laraib Energy Limited, and Uch-II Power Project.

Nishat Chunian Power Limited (NCPL) has formally notified the Pakistan Stock Exchange (PSX) of its agreement to the ‘Hybrid Take and Pay’ model. The company stated that its Board of Directors approved amendments to the Power Purchase Agreement, Implementation Agreement, and revised tariff proposed by the Prime Minister’s Task Force to transition to the ‘Hybrid Take and Pay’ model. The Board also approved executing an Amendment Agreement with the Government of Pakistan and the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) to implement these changes.

Here are some key terms and conditions:

• The Amendment Agreement will take effect on November 1, 2024, with changes to the indexation mechanism for O&M.

• The tariff for working capital and O&M costs has been rebased.

• The return on equity tariff component will be paid under a hybrid take and pay model.

• The insurance premium tariff is capped at 0.9% of the EPC cost.

• The Company will share profits up to FY’23, which will be adjusted against receivables from CPPA.

• The Government of Pakistan (GoP) will unconditionally withdraw arbitration under the Arbitration Submission Agreements.

• Any undertaking by the Company to retain receivables until arbitration concludes will be returned.

• Outstanding receivables as of October 31, 2024, must be paid within 90 days of Cabinet approval.

• There will be a waiver of delay payments until October 31, 2024.

• The LCIA arbitration clause in the PPA will be replaced with arbitration seated in Islamabad under local laws.

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Sources indicate that with the signing of revised agreements with 17 IPPs, the total number of IPPs has increased to about 30, including 5 from before 1994, 1994 and 2002 (Atlas Power Limited), 8 bagasse IPPs, and 17 from the power policies of 1994 and 2002.

The next phase will involve GoP-owned power plants and renewable energy projects, including wind and solar.

The government anticipates a tariff reduction of Rs 3.50 from the IPP revisions, which could reach Rs 6.50 per unit after restructuring debts of Chinese IPPs, contingent on Beijing’s agreement.