ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government and independent power producers (IPPs) are jointly reviewing the old power purchase agreements in a bid to rectify faults and turn the deals beneficial for both sides.
Power Division Secretary Irfan Ali told the Senate Standing Committee on Power on Tuesday that the IPPs had agreed to review the agreements voluntarily for creating better conditions. “The government has also offered some concessions while reviewing the power purchase agreements,” he said.
The parliamentary panel met with Senator Fida Mohammad in the chair.
“There are some faults on our side and some deficiencies are on their side in the old agreements,” the secretary said, adding that it was the initiative of Prime Minister Imran Khan.
The premier had directed the officials concerned to hold talks with the IPPs and if there were mistakes in the agreements, those would be rectified in consultation with the power producers, he added.
It was informed during the meeting that previous governments had approved the payment of return in dollars to the IPPs in which investors had invested in local currency. The IPPs were receiving 17% return on investment.
The committee sought details of agreements signed with the IPPs as well as details of capacity payments made to them in the ongoing fiscal year. It was told that the government had paid Rs664 billion to the IPPs in capacity charges in 2017-18.
Under capacity payments, the IPPs received hefty amounts but did not generate electricity.
Senator Nauman Wazir sought details of balance sheets of the IPPs, saying that the power producers had exploited the government at the time of signing the agreements.
According to their balance sheets submitted to the Securities and Exchange Commission of Pakistan (SECP), they earned 30-40% profit on their investments.
The standing committee was also informed that the IPPs invested in local currency but received profit in dollars. Senator Wazir asked about payment of capacity charges to the power plants that did not generate electricity but received hefty amounts. The committee asked about per-megawatt cost of electricity while noting that there was discrepancy in approval of the cost. The per-megawatt cost for some of the IPPs was $0.5 million while for some others it was over $1 million.
In early February, the Senate Standing Committee on Power was informed that the IPPs were receiving Rs422 billion annually on account of capacity payments without generating any electricity.
Senator Nauman Wazir told the parliamentary panel that the power producers were receiving the hefty amount without generating electricity, which was due to faulty agreements.
He suggested that the government should ink an agreement without the condition of capacity charges and the power plants should instead receive money for the electricity they generated.
He said the guaranteed rate of return for the IPPs was 17%, but according to their balance sheets, they were receiving 40% return.
Published in The Express Tribune, April 17th, 2019.