Cut in rate of return of 12 IPPs to help Pakistan govt save Rs150bn

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday approved reduction from 17 to 12-13 per cent in the Return on Equity (RoE), Return on Equity during Construction (RoEDC), Operation & Maintenance and Insurance components of a total of 12 renewable independent power producers (IPPs) under renegotiated tariff contracts with the government.

The regulator said the reduction in tariffs will result in estimated savings of around Rs150 billion over the remaining life of the projects. Of the total, seven projects are based on bagasse, three on wind and two solar having cumulative capacity of around 355MW. Additionally, the tariff share of these IPPs for energy generation beyond their respective annual plant factors has also been reduced.

The Central Power Purchasing Agency (CPPA) for tariff adjustments of these plants had filed applications before the regulator following signing of agreements between a government team and the IPPs in February this year. The Nepra had completed the public hearings on March 3.

Earlier, this month Nepra had also approved revised tariff agreements with 12 thermal power plants of 2,412MW involving an estimated saving of Rs182bn over the remaining life of these projects. As, total savings under Nepra approved tariffs works out at about Rs332bn, according to official estimates.

Pursuant to Master Agreement, CPPA and these 12 IPPs have agreed to coordinate with their lenders and make all efforts to extend debt tenor by a period of five years, reduce the existing spread by 75 basis points over the Libor, and by 100-125 basis points over-Kibor to provide savings arising out of debt negotiations to be passed on to the government companies. The cap of 1pc in respect of annual insurance has been revised to 0.7pc and 0.5pc of the engineering, procurement and construction (EPC) cost.

As such, the regulator revised the tariff for FFC Energy Ltd RoE component of Rs3.0932 per unit (kWh) to Rs2.3654 and RoEDC component from Rs0.6404/kWh to Rs0.5416.

For Hamza Sugar Mills Ltd, the RoE component of Rs1.0346/kWh has been revised to Rs0.7329 to be applicable for five years from the date of signing of Master Agreement. Subsequently, RoE component of Rs1.7073/kWh shall be applicable.

Variable O&M-local component of Rs0.1197/kWh has been revised to Rs0.1078 while variable O&M-foreign component of Rs0.3393/kWh has been revised to Rs0.3054. Fixed O&M-local component of Rs0.3194/kWh has been revised to Rs0.2875.

In case of Chanar Energy Ltd RoE component of Rs1.0346 has been revised to Rs0.7325/kWh, to be applicable for five years from the date of signing of Master Agreement. Subsequently, RoE component of Rs1.7078/kWh shall be applicable. Its variable O&M-local component of Rs0.1197/kWh has been revised to Rs0.1078 while variable O&M-foreign component of Rs0.3393 has been revised to Rs0.3054/kWh and fixed O&M-local component of Rs0.3194/kWh has been revised to Rs0.2875.

In case of, Artistic Energy (Pvt) Ltd, RoE component of Rs3.6623/kWh has been revised to Rs2.8311 while O&M component of Rs1.5039/kWh has been revised to Rs1.2031/kWh.

Likewise, AJ Power’s RoE component of Rs3.9171 has been revised to Rs3.0023/kWh while withholding tax on dividend shall be considered as pass-through item. O&M component of Rs1.8714/kWh has been revised to Rs1.5907.

Harappa Solar Private Ltd’s RoE component of Rs3.9921 has been revised to Rs3.0600/kWh while withholding tax on dividend shall be considered as pass-through item. O&M component of Rs1.8714 has been revised to Rs1.5907/kWh.

Al Moiz Industries’ RoE component of Rs1.0346 has been revised to Rs0.7325/kWh, to be applicable for five years from the date of signing of Master Agreement. Subsequently, RoE component of Rs1.7078 shall be applicable. Variable O&M-local component of Rs0.1197/kWh has been revised to Rs0.1078 while variable O&M-foreign component of Rs0.3393/kWh has been revised to Rs0.3054/kWh. Fixed O&M-local component of Rs0.3194 has been revised to Rs0.2875/kWh.

DAWN