Nishat Chunian Power approves government deal to amend IPPs agreements

The revised agreement introduces changes to the indexation mechanism, rebases tariffs for operations and maintenance, and implements a hybrid return on equity model

ISLAMABAD: Nishat Chunian Power Limited (NCPL), an Independent Power Producer (IPP), has approved amendments to its agreements with the government, signaling significant changes in the power sector.

The development, announced via a notice to the Pakistan Stock Exchange (PSX) on Wednesday, includes modifications to its Power Purchase Agreement (PPA), Implementation Agreement, and tariff structure.

The Board of Directors of NCPL approved the amendments during an emergent meeting held on December 4, 2024. “The amendments include converting the existing tariff to a ‘Hybrid Take and Pay’ model,” the company stated.

The revised agreement, effective from November 1, 2024, introduces changes to the indexation mechanism, rebases tariffs for operations and maintenance (O&M), and implements a hybrid return on equity model.

Key terms of the amendment include capping the insurance premium tariff at 0.9% of EPC cost, profit sharing until FY23 to be adjusted against receivables, and unconditional withdrawal of arbitration under Arbitration Submission Agreements (ASA) by the government. NCPL also noted that receivables as of October 31, 2024, would be paid within 90 days of Cabinet approval, and payment delays until October 31, 2024, would be waived.

Additionally, the agreement substitutes the LCIA Arbitration clause with Islamabad-seated arbitration under local laws.

This development aligns with the government’s ongoing efforts to renegotiate contracts with IPPs to address financial challenges and reduce electricity tariffs. Last month, Rousch (Pakistan) Power Limited (RPPL) approved the early termination of its agreements, while Hub Power Company Limited (HUBCO) began settlement negotiations in October.

Earlier this week, Energy Minister Awais Leghari announced plans to revise power purchase agreements with 11 IPPs, including bagasse-based plants, to decrease tariffs by up to Rs5 per unit. Speaking at an FPCCI briefing, Leghari emphasized the need for affordable electricity and criticized high tariffs imposed by IPPs. “If electricity is sold at such high rates, who will buy it?” he asked.

Leghari revealed that contracts with five IPPs had already been terminated and reiterated the government’s commitment to halting future electricity purchases from IPPs. He also highlighted improved management in distribution companies, reporting a reduction in losses to Rs11 billion during the first four months of the fiscal year compared to the projected Rs350 billion.

Monitoring Desk
Monitoring Desk
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