CCOE approves recovery from Nishat Chunian

Also allows renegotiating deal with IPPs in light of NAB’s advice on Nishat case

ISLAMABAD:

The Cabinet Committee on energy (CCOE) on Thursday approved recovery of Rs8.36 billion from Nishat Chunian Power Ltd and renegotiating the deal with independent power producers (IPPs) under Power Policy 2002.

The Power Division had submitted a summary on examination, validation of process of IPPs agreement. The committee after detailed discussion approved the proposal that the agreements with IPPs under Power Policy 2002 finalised by the implementation committee be reviewed in the light of advice by the National Accountability Bureau (NAB) advice in the Nishat Chunian Power Ltd case.

It was further decided that the implementation committee will be revived and a representation of Law Division will be included in its composition. The revived implementation committee will re-negotiate the master agreements with IPPs of 2002. The outcomes of renegotiations by the implementation committee will be submitted for consideration of CCOE.

During an investigation, the cabinet body on energy was informed that NAB had established illegal gains of Rs8.36 billion against Nishat Chunian Power plant. This plant was set up under Power Policy 2002 along with several other power plants.

Following the audit report on power sector, government negotiated a deal with IPPs and claimed to have saved around Rs836 billion through the revised agreement.

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The government had paid Rs90 billion to 35 IPPs under a deal. However, it had withheld payment to IPPs established under Power Policy 2002 including Nishat Chunian power plant due to investigation launched by National Accountability Bureau (NAB). NAB had informed the energy ministry that it had established Rs8.36 billion illegal gains by Chunian Power plant. The audit committee had established the same illegal gains by other power plants installed under power policy 2002.

The energy ministry informed the CCOE on Thursday that NAB wanted the government to recover the illegal gains from the IPPs including Nishat before proceeding further on the process of payments.

The energy ministry had also informed the cabinet body on energy that it should revise the master agreement signed with IPPs under Power Policy 2002.

NAB has established case against Nishat Chunian Power Ltd due to the determination of tariff at the higher side. It further intimated that “Ministry of Energy, if so desired, may proceed under Power Policy 2002 after securing the amount of loss caused to the state as established during the above stated NAB investigation in the best interest of the state.

The CCOE on September 24, 2020, had formed an implementation committee for, inter-alia, implementation of MoUs. The CCOE and Economic Coordination Committee (ECC) considered the report by the implementation committee and approved the payment mechanism and agreements with IPPs in meetings held on February 8, 2021 and the cabinet had ratified it on February 9, 2021.

On a summary of the Power Division submitted on May 5, 2021, the ECC decided and federal cabinet had ratified the decisions of the ECC.

It was decided that the government may process payments to all IPPs (under pre-1994, 1994, and 2006 Power Policy) accordingly to the signed agreements except the IPPs under Power Policy 2002 until the conclusion of NAB investigation.

It was also decided that the case of IPPs under power policy was under investigation of NAB. Therefore, they decided to withhold the payments to IPPs under Power Policy 2002.

The cabinet had also decided to approach NAB to examine and validate the process negotiations and signing of agreements including the arbitration submission agreement.

The government had also asked any objection raised by NAB to the signing of these agreements and making payments to the IPPs of 2002 policy.

NAB in its letter informed about the agreements with all IPPs of the 2002 Policy saying that agreements with 2002 IPPs, the implementation committee had finalised, do not provide a deduction of illegal gain made by IPPs.

Keeping in view this background, the Power Division had submitted recommendations to CCOE for approval. The CCoE had established the implementation committee in September 2020.

The Power division proposed to assign it the responsibility of renegotiating the master agreements with IPPs established under the 2002 policy to cater to demands mentioned in letter from NAB.

Published in The Express Tribune, July 16^th, 2021.

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