Govt to renegotiate deals with 12 independent power producers on NAB advice

Published July 16, 2021
The committee also revived an implementation committee led by the finance minister with the addition of a representative from law division which had concluded agreements with about 47 IPPs in February this year. — AFP/File
The committee also revived an implementation committee led by the finance minister with the addition of a representative from law division which had concluded agreements with about 47 IPPs in February this year. — AFP/File

ISLAMABAD: Reversing earlier decisions and agreements, the government on Thursday decided to ‘re-negotiate’ once again power purchase agreements (PPA) with about a dozen independent power producers (IPPs) set up under Policy for Power Generation 2002 to recover ‘excess payments’ they had secured from the government.

The Cabinet Committee on Energy (CCoE), presided over by Planning Minister Asad Umar, took this decision on the advice of the National Accountability Bureau (NAB) for recovery of about Rs52bn including about Rs8.4bn from Nishat Chunian project of Mansha Group. The committee also revived an implementation committee led by the finance minister with the addition of a representative from law division which had concluded agreements with about 47 IPPs in February this year.

The government had paid first instalment of about Rs90bn to all other IPPs about two months ago but withheld payments to about a dozen IPPs as NAB had taken cognisance of their deals and alleged illegal gains they had secured over the period of their operations. Under the February agreements, the two sides had agreed on local arbitration to settle the issues pertaining to excess payments or illegal gain.

The CCoE approved a proposal of the Power Division that “the agreements with IPPs set up under the power policy 2002 finalised by the implementation committee be reviewed in the light of NAB advice in the M/S Nishat Chunian Power Ltd case,” said an official statement, adding the “the revived Implementation Committee will re-negotiate the Master Agreements with IPPs of 2002” and submit outcomes of re-negotiations to the CCoE.

On Sept 24, 2020, the CCoE had constituted an implementation committee led by then energy minister Omar Ayub Khan to effectuate into formal agreements the revisions in various terms and conditions. On Oct 10, Dr Hafeez Shaikh, then adviser finance, replaced Mr Ayub as head of the implementation committee, while Tabish Gohar replaced Shahzad Qasim in the committee.

Other members of the committee included Babar Yaqoob Fateh Muhammad who led the negotiations with the IPPs, the secretaries of power and finance, Barrister Qasim Wadud and the chief executive of the Central Power Purchasing Agency Guarantee Ltd.

Various forums, including CCoE, ECC and the federal cabinet approved the payment mechanism finalised by the implementation committee and agreements with IPPs in February. However, NAB intervened into the matter as an earlier commission led by former SECP chairman Muhammad Ali had alleged excess gains by the 2002 policy IPPs.

Finally, in May this year, the cabinet allowed payments to all IPPs under the Pre-1994, 1994 and 2006 Power Policy but excluded 12 IPPs under Power Policy 2002 till the conclusion of the NAB investigation.

The NAB has now contended that illegal gain of Rs8.36bn had been established against Nishat Chunian Power. It advised the Power Division to proceed with the subject but made legal exceptions to revised agreements which should be vetted by the Ministry of Law to secure the established excess payments to 12 IPPs of 2002 policy.

The Power Division told the CCoE that agreements with the 2002 IPPs, finalised by the implementation committee, did not provide for deduction of illegal gains and agreements already inked with IPPs had to be reviewed and the same process be followed again including re-negotiation by the implementation committee, approval of its recommendations and agreements with the IPPs and the formal ratification by the cabinet.

The Power Division had, therefore, asked the CCoE to revive the implementation committee on IPPs and assigned the task of renegotiating the master agreements with IPPs established under 2002 Power Policy as advised by NAB and the outcomes of the re-negotiations by the implementation committee may be submitted for consideration and approval by CCoE.

Published in Dawn, July 16th, 2021

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