Delay in signing of deals irks cabinet body

ISLAMABAD:

The delay in signing agreements with K-Electric has raised serious concerns for policymakers who have called upon the Power Division to place these deals before them for final approval.

Sources told The Express Tribune that K-Electric was expected to sign agreements with state-run entities for power supply.

However, they are being delayed for the last few months which irked the policymakers in a recent meeting of the Cabinet Committee on Energy (CCOE).

Chaired by Federal Minister for Planning, Development and Special Initiatives Asad Umar, the meeting highlighted the issue while considering a report of circular debt for January 2022.

The Power Division presented the monthly circular debt report for consideration of the cabinet body.

During detailed discussion, policymakers observed that performance of utility was lagging behind as far as recovery of dues was concerned.

It performance in terms of improvement in controlling power sector losses was slightly better than the corresponding period of previous year.

The CCOE chairman inquired about the status of the power purchase amendment agreements (PPAA), inter-connection agreements (ICA) and other allied agreements with K-Electric.

The Power Division secretary informed the forum that the deals were taking time because agreements were under review. He added that they entailed massive implications and maximum possible benefits for the government were being ensured.

The committee, however, observed that finalisation of the deals was delayed for many months and called for placing them before CCOE in its next meeting for consideration and approval.

The National Transmission and Despatch Company (NTDC) and K-Electric have to sign a power purchase agreement. However, the state-run NTDC wants to ink an agreement to provide electricity on ‘available basis’ whereas K-Electric wants guaranteed supply of electricity to meet rising demand of Karachi, sources in the Power Division said.

The electricity demand in Karachi is growing with the passage of time therefore, the port city requires a guaranteed supply of electricity.

Earlier, Umar announced that the federal government would provide 2,100 megawatts of electricity by 2023 to K-Electric in a bid to meet the rising demand for power from the national grid.

The government claimed that the country possessed surplus power which led the CCOE to shelve the plan of installing 700 MW coal-based power plant in Karachi.

The National Electric Power Regulatory Authority (Nepra) accorded all approvals to install this power plant and K-Electric acquired land to for the purpose.

The committee had given go ahead to provide electricity from the national grid to K-Electric as the country has surplus electricity.

At present, sources said that K-Electric was also facing the problem of low pressure of gas supplied by the Sui Southern Gas Company (SSGC).

SSGC was providing 90 mmcfd gas in line with approval of the federal government. However, K-Electric and SSGC have been unable to sign gas sales agreement so far. The low pressure of gas is another problem for K-Electric plants.

Pakistan LNG Limited (PLL) and K-Electric signed a 150 mmcfd LNG (liquefied natural gas) supply agreement. Now, PLL and SSGC are to sign an agreement to use the network of SSGC for supply of LNG that has also been delayed so far.

The CCOE noted the position presented by the Power Division regarding ‘circular debt report for January, 2022’ and directed the division to place pending PPAA, ICA and other agreements with K-Electric for consideration and approval in its next meeting.

It further directed the Power Division to submit a way forward for improvement of performance of power distribution companies in one week’s time.

It further directed the Power Division secretary to prepare a presentation on recovery.

K-Electric’s version

K-Electric’s spokesperson told The Express Tribune that K-Electric has been engaged with the government of Pakistan and associated stakeholders including the energy and finance ministries for an amicable resolution to the Power Purchase Agreement (PPA), Interconnection Agreement (ICA) and the Tariff Differential Subsidy (TDS) Agreement.

Through extensive consultation, these agreements have been initialed and agreed between the parties and some items require decision and approval from the Cabinet Committee on Energy (CCOE) for further action.

“We understand that the Power Division is in the process of moving a summary to the CCOE and all stakeholders await its response for further action,” he said.

The Saudi Arabian and Kuwaiti investors of K-Electric, who have held significant stake in the company since the utility’s privatisation in 2005, also met recently with members of the federal government and were assured of their complete support.

Published in The Express Tribune, March 13^th, 2022.

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