485 days extension in contract is within T&Cs of PPA, KAPCO clarifies

April 13, 2022 (MLN): Kot Addu Power Company Limited (KAPCO) has said that 485 days extension in its contract is within the terms and conditions (T&Cs) of the Power Purchase Agreement (PPA) and it will duly file a Tariff Petition, in due course, before NEPRA for continuing its operation beyond the term of its PPA, which expires on October 24, 2022.

While clarifying the inaccuracies in the news item published in the section of the media which is leading to unwarranted apprehensions as it is based on incomplete understanding, the company said that due to the continued default on payments resulting in the piling of huge payables by the Power Purchaser, KAPCO was unable to procure required fuel to meet the despatch requirement of the system. Despite its own default, Power Purchaser imposed LDs during the period 2009-16 which were immediately disputed by KAPCO. As per PPA, KAPCO initiated arbitration proceedings under the International Chamber of Commerce (ICC) which were underway in Singapore when the Government of Pakistan formed a Negotiation Committee in June 2020 to enter into discussions with IPPs for, inter alia, tariff reduction.

KAPCO, like other IPPs, at the request of the Government entered into negotiations with the Negotiation Committee, and keeping in view the larger national interest, signed a Memorandum of Understanding in August 2020 (MoU). The MoU was duly approved by all the relevant authorities including the Federal Government. Following which, the formal Master Agreement and the Third Amendment to the PPA (Third PPA Amendment) were signed between KAPCO and the Power Purchaser in February 2021.

As per the settlement of the LDs dispute between KAPCO and the Power Purchaser (under the Third PPA Amendment), it was agreed to treat the outage period (2009 to 2016) due to fuel shortage as an Other Force Majeure Event under the PPA and existing term of the PPA was consequently extended by 485 days. During the 485 days extended period, KAPCO is to receive Energy Payments for energy delivered; and is neither invoicing nor receiving Capacity Payments from the Power Purchaser for the extended period. Further, as part of the settlement, KAPCO is invoicing Energy Payments with an 11% discount in the Variable Operation and Maintenance portion against the delivered net output. It will not be out of place to state that as part of the settlement the parties agreed to settle some other disputes as well, the company said.

“485 days extension is within the terms and conditions of the PPA, the company said, adding that similar terms have also been agreed with some of the other IPPs through negotiation/settlement.

With regards to the tariff petition, the company informed that it will duly file a Tariff Petition, in due course, before NEPRA for continuing its operation beyond the term of its PPA, which expires on October 24, 2022.

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