KAPCO confirms no capacity charges received since PPA expiration

August 07, 2024 (MLN): In response to media reports claiming that Kot Addu Power Company Limited (KAPCO) is receiving payments without generating electricity, the company clarified that no capacity payments have been made by the Power Purchaser since the Power Purchase Agreement (PPA) expired on October 24, 2022.

However, KAPCO further mentioned that it received payments of overdue receivables from the Power Purchaser (relating to the period up to the end of the PPA on October 24, 2022), which have been properly reported in the company’s financial statements.

To recall, the company entered into a suite of agreements including the PPA in June 1996 at the time of its privatization by the Privatization Commission, government of Pakistan.

The term of the PPA was for twenty-five years, which was set to expire in June 2021.

Pursuant to the terms of the Third Amendment to the PPA and Master Agreement, the pending dispute of liquidated damages with the Power Purchaser was settled and consequently the term of the PPA was extended by 485 days (approximately 16 months) till October 24, 2022.

For the extended period of 485 days the company did not charge any capacity payments but was obliged to keep its power plant available to the Power Purchaser for generation during this period.

Since the expiry of the PPA on October 24, 2022, due to the absence of an operating regime, KAPCO's power plant has been in preservation mode.

The company's tariff application is pending final determination before the National Electric Power Regulatory Authority (NEPRA).

Moreover, KAPCO has the unique feature of 220KV-132KV switchyard and this facility is being provided to the Power Purchaser on special request from Ministry without any compensation from the date of expiry of PPA.

This arrangement is intended to serve the best interests of MEPCO Region consumers and ensure the smooth functioning of the national grid operations.

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