Narowal Energy Limited (NEL), a subsidiary of the Hub Power Company Limited (HUBCO), has signed an Amendment Agreement with the Government of Pakistan and the Central Power Purchasing Agency (CPPA) to implement key tariff revisions, including the introduction of a ‘Hybrid Take and Pay’ model, according to a filing at the Pakistan Stock Exchange (PSX) on Wednesday.
The agreement, dated February 14, 2025, follows the recommendations of a Task Force formed under the Prime Minister’s Office to restructure power sector tariffs.
The company said that the agreement, effective from November 1, 2024, revises multiple financial aspects of NEL’s power tariff.
The indexation mechanism for Operations & Maintenance (O&M) has been changed, while the tariff components for working capital and O&M have been modified.
Additionally, the Return on Equity tariff component will now be paid under a hybrid ‘take and pay’ mechanism. The insurance premium tariff has been capped at 0.9% of the Engineering, Procurement, and Construction (EPC) cost.
A major development under the agreement is the government’s decision to unconditionally withdraw arbitration proceedings under previous agreements. Furthermore, CPPA has committed to clearing outstanding receivables as of October 31, 2024, within 90 days of cabinet approval. The agreement also includes a waiver on outstanding late payment interest up to October 31, 2024.
Additionally, the arbitration clause in the Power Purchase Agreement (PPA) will be replaced, shifting the arbitration forum from the London Court of International Arbitration (LCIA) to an Islamabad-seated arbitration process under local laws.
The agreement is expected to enhance financial predictability for NEL while ensuring stability in the country’s power procurement framework.
