Power Division backed out of IAs?


ISLAMABAD: Power Division is said to have “backed out” of Implem-entation Agreements (IAs) with the Independent Power Producers (IPPs) established under the Power Policy 2002, and proposed negotiation of Master Agreements in the light of National Accoun-tability Bureau’s (NAB's) recent letter, sources close to Minister for Planning, Development and Special Initiatives told Business Recorder.  

Power Division's stance is being viewed as contrary to the viewpoint of Finance Minister, Shaukat Tarin, who on June 22, 2021 while replying to an enquiry with regard to stalemate in payments to IPPs and Roosevelt hotel, assured the Cabinet of resolution of the issue through imminent discussions with the National Accountability Bureau.

The Cabinet Committee on Energy (CCoE) headed by Asad Umar, Minister for Planning, Development and Special Initiatives, was scheduled for Monday (July 12, 2021) to take a decision on this issue but was cancelled at the eleventh hour. 

Sharing details, the sources said CCOE on 24 September, 2020, constituted an Implementation Committee for implementation of MoUs. The CCoE and Economic Coordination Committee (ECC) of cabinet considered the report by Implementation Committee and approved the payment mechanism and agreements with IPPs in meetings held on February 8, 2021, which was ratified by the Cabinet on February 9, 2021. On a summary submitted by Power Division on May 5, 2021, ECC decided and Federal Cabinet ratified the following decision of the ECC on May 18, 2021: payments to all IPPs (under the Pre-1994, 1994 and 2006 Power Policy) may be processed according to the signed agreements except the IPPs under Power Policy 2002 till the conclusion of the NAB investigation.

The matter of the alleged saving in the tariff component of 12 IPPs of the 2002 Policy is already under investigation by NAB which may be requested to examine and validate the process of negotiations and signing of agreements including Arbitration Submission Agreement. NAB was also requested to inform if it has any objection to the signing of these agreements and making of payments to the IPPs of the 2002 Policy, and Power Division accordingly conveyed the decision of ECC, as ratified by the Federal Cabinet to NAB on May 25, 2021. In response to a letter by Power Division, NAB declined to examine or validate the process, or to inform if it has any objection to these agreements or making payments to IPPs under these agreements through their letter dated June, 08, 2021.   

In view of the previous decisions by ECC and Federal Cabinet and response from NAB, Power Division submitted a summary for the consideration of ECC with a proposal that the payments to IPPs (under the Power Policy 2002) may continue to be withheld, and the process of signing Arbitration Submission Agreement with these IPPs and notification of the revised tariffs as determined by Nepra may remain suspended till NAB investigations are concluded. However, the agenda was deferred.

NAB has now contended that “illegal” gain of Rs. 8.36 billion has been established against M/s Nishat Chunian Power Ltd, due to determination of tariff at the higher side. NAB further intimated that "Ministry of Energy, if it so desires, may proceed subject to all legal exceptions to the revised agreements duly vetted by the Ministry of Law and Justice, with the IPPs under Power Policy2002, after securing the amount of loss caused to the State, as established during the stated NAB investigation in the best interest of the State".  

Power Division argues that the “illegal” gain of Rs. 8.36 billion established against Nishat Chunian by NAB is almost the exact amount determined by the negotiation committee. Similar amounts were also determined against other IPPs of the 2002 Policy. The amounts determined as excess profits by the Committee for Power Sector Audit, Circular Debt Resolution & Future Roadmap were slightly different. NAB in its letter is talking about the agreements with all the IPPs of the 2002 Policy.

Power Division further argues that agreements with the 2002 IPPs, finalized by the Implementation Committee, do not provide for deduction of “illegal” gain made by an IPP and the agreements already inked will need to be reviewed. In order to review the agreements, the same process needs to followed, which was followed for earlier approval, i.e., negotiation by the Implementation Committee with the IPPs and approval by CCoE before referring the matter to ECC of the Cabinet.

After explaining the history, Power Division has submitted the following for consideration of CCoE: (i) Implementation Committee constituted by CCoE on September 24, 2020 may be assigned the responsibility of renegotiating the Master Agreements with IPPs established under 2002 Policy to cater to the NAB's letter of June 8, 2021; and (ii) outcomes of the re-negotiations by the Implementation Committee may be submitted for consideration and approval by CCoE.