The government decided to once again ‘renegotiate’ power purchase agreements (PPAs) with about a dozen independent power producers (IPPs) established under the 2002 Power Generation Policy to recover ‘payments in excess’ they had guaranteed from the government.
The Cabinet Committee on Energy (CCoE), chaired by Planning Minister Asad Umar, made this decision on the advice of the National Accountability Bureau (NAB) for the recovery of around Rs52bn including around Rs8.4bn from the Mansha Group’s Nishat Chunian project. The committee also resurrected an implementation committee chaired by the finance minister, with the inclusion of a person from the legal division, who had finalised arrangements with around 47 IPPs in February of this year.
The government paid the first installment of about 90 billion rupees to all other IPPs about two months ago, but withheld payments to about a dozen IPPs as the NAB took notice of their business and claimed illegal earnings that they had. guaranteed during the period of its operations. Under the February agreements, the two sides agreed to local arbitration to resolve issues relating to overpayments or illegal earnings.
The CCoE approved a proposal from the Energy Division that “the agreements with IPPs established under the 2002 energy policy finalized by the implementation committee be reviewed in light of the advice of the NAB in the M/S Nishat Chunian Power Ltd case”, said a statement officially, adding that “the revived Implementation Committee will renegotiate the main agreements with IPPs from 2002” and present the results of the renegotiations to the CCoE.
On September 24, 2020, the CCoE constituted an implementation committee led by then Minister of Energy Omar Ayub Khan to formalize the reviews under various terms and conditions. On October 10, Dr. Hafeez Shaikh, then financial advisor, replaced Ayub as head of the implementation committee, while Tabish Gohar replaced Shahzad Qasim on the committee.
Other committee members were Babar Yaqoob Fateh Muhammad, who led 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.
Several forums, including CCoE, ECC, and the federal cabinet, approved the payment mechanism finalized by the implementation committee and agreements with IPPs in February. However, the NAB intervened in the matter because an earlier commission led by former SECP chairman Muhammad Ali claimed excessive gains by the 2002 policy IPPs.
The NAB has now argued that an illegal gain of Rs8.36 billion has been established against Nishat Chunian Power. He advised the Energy Division to pursue the matter but made legal exceptions to the revised agreements that should be reviewed by the Ministry of Justice to guarantee the overpayments established for 12 IPPs under the 2002 policy.
The Energy Division, therefore, asked the CCoE to reactivate the IPP implementation committee and assigned the task of renegotiating the main agreements with IPPs set out in the 2002 Energy Policy, as advised by the NAB and the results of the renegotiations by the implementation committee may be submitted for consideration and approval by the CCoE.