Govt, 18 IPPs likely to reach deal on take-and-pay mode in two-weeks

• Govt to pay IPPs' past dues in shape of cash, T-bills.
• It will also continue to bail out IPPs regarding O&M cost.
• Move will allow govt to save Rs70 to Rs100bn annually.
  

ISLAMABAD: Weeks after five Independent Power Producers (IPPs) initiated the termination of their contracts in light of outcry over the inflated power bills, the incumbent government is likely to strike a deal with 18 IPPs for "take and pay" mode for electricity purchase, The News reported on Monday.

"The government would pay the said 18 IPPs in the shape of cash or T-bills the past dues in the head of energy charges and capacity payments but they would not be paid interest payments," said power sector industry and government officials.

The said IPPs have the cumulative capacity to generate electricity of 4,267 megawatts and were set up under 1994 and 2002 power policies.

The move will allow Prime Minister Shehbaz Sharif's administration to save around Rs70 to Rs100 billion per year amid prevailing various challenges faced by the country on the economic front.

The government would pay only against the actual electricity dispatch under "take and pay" mode and IPPs would not be paid capacity payments at all. However, the government has assured the IPPs that it would also pay the annual expenditures enough to keep the power plants afloat to ensure their existence in the system.

The development comes after the publication, back in September, reported that the incumbent government had decided to treat the state-run and privately-owned IPPs in the same way with regards to making them operational on take-and-pay mode.

"We have decided to get the government out of the electric power business. The powerhouses owned by the government generating 52% of electricity would also be shifted to take-and-pay mode. The government would finance them only to make them operational," said an official back then was was among the top functionaries serving as members of the task force on power sector reforms.

"The electricity would be purchased from government power plants based on take-and-pay mode. The payment would be made only for electricity to be purchased. Return on Equity is to be paid on a take-and-pay basis," he added.

Notably, the 18 IPPs that would be made operational now under take-and-pay mode are Uch-I Power Limited of 586 MWs, Pakgen Power Limited of 365 MWs, Liberty Power Daharki Ltd 235 MWs, Kohinoor Energy 131 MWs, Fauji Kabirwala Power Company Limited 157 MWs, Attock Gen Limited (165 MWs), Engro Power Gen Qadirpur Limited 227 MWs, Foundation Power (Daharki) of 185 MWs, Halmore Power Generation Company 225 MWs, Liberty Power Tech Limited 200 MWs, Liberty Power Tech Limited 225 MWs, Narowal Energy Tech Limited 220 MWs, Nishat Chunian Power Limited 200 MWs, Nishat Power Limited 200 MWs, Orient Power Company 229 MWs, Saif Power Limited 229 MWs, Laraib Energy Limited 84 MWs and Uch-II Power Project of 404 MWs.

The government would continue to purchase electricity from the 18 IPPs under the take-and-pay mode until the private power market is established.

Meanwhile,  in the head of operation and maintenance (O&M) cost, the government would continue to bail out the IPPs.

Once the deal with 18 IPPs is done, then the Task Force on Power would turn to the government power plants (GPPs) that include LNG-based power projects, generation companies (Gencos), provincial government plants, nuclear and hydropower power projects and they would also be treated as IPPs and become operational under "take and pay" mode.