KAPCO denies receiving capacity charges

Kot Addu Power Company Limited (KAPCO) announced on Wednesday that it has not received any "capacity payments" from the government (power purchaser) in the past 22 months since its power purchase agreement (PPA) expired in October 2022.

The company clarified that reports suggesting it received payments without generating electricity are contrary to reality. However, KAPCO has received payments for overdue receivables from the power purchaser, related to the period up to the end of the PPA on October 24, 2022, and these have been properly reported in the financial statements of the company.

Since the expiry of the PPA, due to the absence of an operating regime, the company's power plant has been in preservation mode. KAPCO's tariff application is currently pending final determination before the National Electric Power Regulatory Authority (NEPRA).

The company entered into a suite of agreements, including the PPA, in June 1996 during its privatisation by the Privatisation Commission, government of Pakistan. The term of the PPA was for twenty-five years, set to expire in June 2021. Pursuant to the terms of the Third Amendment to the PPA and Master Agreement, the pending dispute of liquidated damages with the power purchaser was settled, and consequently, the term of the PPA was extended by 485 days (approximately 16 months) until October 24, 2022.

For the extended period of 485 days, the company did not charge any capacity payments but was obliged to keep its power plant available to the power purchaser for generation during this period.

KAPCO has the unique feature of a 220KV-132KV switchyard, and this facility has been provided to the power purchaser on special request from the ministry without any compensation since the expiry of the PPA, in the best interest of the consumers of the MEPCO Region and the smooth functioning of overall national grid operations.