The Economic Coordination Committee (ECC) of the Cabinet, has approved the settlement of Rs. 21 billion capacity payment issues with Port Qasim Electric Power Company (PQEPCL).
The ECC has further authorized the Central Power Purchasing Agency (CPPA-G) to engage in negotiations with other CPEC power projects facing similar challenges for a side agreement.
The Federal Minister for Finance, Revenue, and Economic Affairs, Dr. Shamshad Akhtar presided over a meeting of the ECC of the Cabinet.
Sources said that the Ministry of Energy requested the ECC to approve the settlement of capacity deductions due to fuel shortage and allow CPPA-G to negotiate with other CPEC power projects facing identical issues for a side agreement.
The CPPA-G and PQEPCL after several meetings agreed on a side agreement which was also approved by the Board of Directors of CPPA-G.
According to the agreement, in case of IPPs running on imported coal, if the foreign exchange is not available for procurement of imported coal, the power purchase shall neither deduct the capacity Purchase price nor impose the liquidating damages for the period during which the projects remained unavailable due to fuel shortages.
For such a period the IPP shall waive their right to claim the return on equity and cost of working capital component of the capacity purchase price.
The IPP shall perform at the end of the PPA term for the same number of days equal to the number of days it remained unavailable due to fuel shortage.
During these additional days, the company shall be entitled to the capacity Purchase Price as indexed for the last quarter of the term and the energy purchase price as per terms of the PPA.
Sources said that China-Pakistan Economic Corridor (CPEC) Independent Power Producers (IPPs) running on imported coal have been agitating issues of capacity deductions and imposition of liquidated damages, due to the nonavailability of power plants.
The CPEC IPPs have claimed that the non-availability of plants is attributable to the failure on the part of the government of Pakistan to provide necessary foreign exchange cover for the procurement of imported coal, which has caused a fuel shortage.
Further, these CPEC IPPs have demanded that capacity deducted should be released for such a period during which the provision of necessary foreign exchange for procurement of coal is the responsibility of GoP under the implementation agreement.
Specifically, PQEPCL suffered nonavailability for 82 days, resultantly, CPPA deducted an amount of Rs21 billion from the capacity payment of PQEPCL.
Sources said that stakeholders recommended that the government negotiate the agreement on aspects about the immediate stoppage of capacity payment deductions to the extent of FOREX’s unavailability for buying coal and settlement mechanism for the already accumulated amount on account of capacity payment deductions.
According to the Finance division, ECC approved a settlement of the issue with PQEPCL as proposed by the Power Division.
