HUBCO’s Subsidiary and CPPA Enters an Agreement to Reduce Tariff

Narowal Energy – a unit of Hub Power – has entered an agreement with the state-owned Central Power Purchasing Agency, a notification issued to the Pakistan Stock Exchange (PSX) by Hub Power said on Monday.

The Narowal Energy Limited (a wholly-owned subsidiary of HUBC under the 2002 Power Policy) and Central Power Purchasing Agency (CPPA) (Guarantee) Limited (Power Purchaser) have initialed an agreement in furtherance of the Memorandum of Understanding dated August 12, 2020, the notification said.

Under the agreement, at the request of the Government of Pakistan, in the greater national interest and sectoral sustainability, the future O&M savings and heat rate efficiency shall be shared by the Parties.

The payment of overdue receivables is an integral part of the agreement, and the payment mechanism of the company’s overdue receivables is in the process of being finalized with installments comprising cash and other financial instruments, the statement informed.

Under the agreement, the return on equity (ROE) has been changed to 17 percent in rupees from the current rate of 15 percent in dollars, with no future dollar indexation, and the dollar equity will be converted to rupee at 148/$.

However, the current indexation shall continue to be applied until the date the applicable exchange rate under the present Tariff reaches PKR/US$ of 168. Further, on the full implementation of the Competitive Trading Arrangement, subject to mutual agreement between the Parties, the plant will move to a Take & pay basis. Reconciliation and terms of assessment of past payments will also form part of this Agreement.


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Furthermore, the plant will move to take and pay basis. It may be notable here that many independent power producers (IPPs) signed a memorandum of understanding to renegotiate tariffs with the government in August.

The statement added, “Reconciliation and terms of assessment of past payments will also form part of this agreement. Settlement of withheld Capacity Payments disputes settled by LCIA pending enforcement before the Lahore High Court is also part of the agreement.”

The terms of the agreement are subject to the approval of the Board of Directors of Narowal Energy Limited, Hubco, NEPRA, the Federal Cabinet, and execution of a final binding agreement.

Negotiations are underway between the Committee and the company concerning the Hub Power Plant. Any understanding will be disclosed as and when an agreement has been reached, the notification said.



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