Pakistan signs PPA agreement with 13 IPPs in bid to bring down the cost of electricity

Prime Minister Imran Khan had congratulated the nation on the singing of the agreement with IPPs and said Pakistan had turned the corner and now ample job opportunities would be available to the people

 

 

Therefore, in the agreement, the dollar to rupee rate has been fixed and until the duration of the agreement, it will remain steady at Rs 148

The government signed a new deal with Independent Power Producers (IPPs) in a bid to bring down the cost of electricity generation and reduce the circular debt. The government sources said that the agreement will lay the basis for buying electricity from power producers in the future and also fix tariff issues. Another six wind power IPPs will sign the agreement, sources said, adding that these electricity producers are from private, government, and China Pakistan Economic Corridor sectors. These IPPs will receive profit in rupees and not dollars, as underlined in the 1994 and 2002 power policy. Therefore, in the agreement, the dollar to rupee rate has been fixed and until the duration of the agreement, it will remain steady at Rs148. Sources said that in these talks, no agency official was present and the committee was given two kinds of authority under which it will do a forensic audit of the IPPs and lead talks for an agreement. They added that the IPPs agreed to return Rs104 billion to the government. National Electric Power Regulatory Authority (Nepra) will be the receiving authority. Those foreign investors who will pitch in money will get profit in dollars from the project. The government sources said that the agreement will lay the basis for buying electricity from power producers in the future and also fix tariff issues. Prime Minister Imran Khan had congratulated the nation on the singing of the agreement with IPPs and said Pakistan had turned the corner and now ample job opportunities would be available to the people. PM Imran said he wanted to share the good news that as a result of an agreement with the IPPs, the power tariff will come to reduce for industries and household users will also benefit. He noted that negotiations with the IPPs were underway for the last many days and now with an agreement in place, it would help decrease the circular debt. He said the government is reforming the loss-making power sector. Meanwhile, Minister for Information and Broadcasting Shibli Faraz on Saturday said that the new agreement with Independent Power Producers (IPPs) would enable the government to purchase cheap electricity from private companies and provide electricity to end consumers at lower rates. The information minister said this while addressing a press conference. Special Assistant to the Prime Minister on Power Sector Shahzad Qasim was also present on the occasion. The information minister said that a basic agreement has been signed with IPPs which is the first major step towards providing cheap electricity to the consumers. He said that the previous governments had failed to negotiate with the IPPs and expensive power contracts were signed adding that it was not possible to undo such contracts unilaterally. He said Prime Minister Imran Khan wanted to address the issue of expensive electricity on an immediate basis due to which a team was constituted which held negotiations with the IPPs to revisit the old contracts. The information minister said that under the new agreement signed with the IPPs payments will only be made for the electricity acquired and consumed instead of the total installed capacity of a particular power plant. Faraz added that the return on equity will now be paid in Pakistani rupee rather than the US dollar. He informed that the government intends to enhance the share of renewable energy to 20 to 25 percent in the overall energy mix by 2030, which will help ease dependence on petroleum fuel and reduce the cost of electricity production. Similarly, Shahzad Qasim highlighted that one of the key milestones achieved in the latest Memorandum of Understanding (MoU) signed with the IPPs is that fuel efficiency tests of plants will be held and their results will be shared with the electric power regulator. “The IPPs would not only have to follow the prescribed limit of National Electric Power Regulatory Authority (NEPRA) but the savings would also have to be shared with the government,” he said adding that it would help reduce the cost of electricity. He highlighted that earlier the late payment surcharge to be paid by the government to the IPPs was Kibor plus 4.5 percent which has now been reduced to Kibor plus 2 percent. The special assistant to the prime minister said that the government is working to change the whole power purchase regime with the IPPs as the current system guarantees payment of electricity to the power producers as per their installed capacity even if the actual purchase of electricity was much lower. “It will take between one and two years to devise a new power purchase regime,” he added. He added that past dues of the power producers would be cleared by the government and the MOU would only be applicable after the dues are cleared. Shahzad Qasim said that the tariffs of various hydropower plants of Water and Power Development Authority are being rationalized at a uniform rate since currently, different projects have different rates of return.