February 3, 2020 (MLN): Nishat Power Limited and the Central Power Purchasing Agency (Guarantee) Limited have initialed “Master Agreement” and “PPA Amendment Agreement”, the company informed PSX on Wednesday.
According to the notification issued by the company in this regard, the formal signing of these agreements is subject to approvals of the Board of Directors of the Company, other stakeholders, and regulatory approvals.
The terms of the Master Agreement are, inter alia:
a) Starting from the financial year 2021-22, any future savings in fuel shall be shared on a sliding scale starting from 70:30 in favor of the power purchaser for the first 0.5% efficiency improvement above currently, NEPRA determined benchmark efficiency, followed by 60:40 for next 0.5%, followed by 50:50% for next 0.5%, and finally 40:60 for any efficiency above that. Power purchaser shall not share in any efficiency losses. However, fuel losses in any financial year shall be carried forward for the adjustment in subsequent financial years.
b) Starting from the financial year 2021-22, any future savings in O&M shall be shared 50:50 after accounting for reserve/accruals created or accrued, or to be created for overhauling, to be reviewed by power purchaser. The Parties agree that if the reserve/accruals for overhauls remains unutilized at the end of the Term, it shall be shared in half (the ratio of 50:50) between the Power Purchaser and the Company. If the overhaul expense exceeds the reserves available at the time of overhauls, the difference shall be carried over to future years. The Power Purchaser shall not be liable to share in O&M and overhauls losses.
c) The Power Purchaser shall appoint, at its own cost, a reputable international independent consultant to perform a one-time detailed heat rate test, and the terms of reference, standards, and corrections required shall be agreed in the Operating Committee, in order to ensure that the actual efficiency matches the efficiency reported in the most recent annual financial statement.
d) The Company agrees to a prospective reduction in tariff component with the Return on Equity (“RoE”) and Return on Equity During Construction (“RoEDC”), 17% per annum in PKR on NEPRA approved equity at Commercial Operations Date for RoE and RoEDC calculated at USD/PKR exchange rate of PKR 148/USD, with no future USD indexation for local investors. Notwithstanding anything contained otherwise herein, the existing RoE and RoEDC, together with the applicable indexation, shall continue to be applied until the date the applicable exchange rate under the present Tariff reaches PKR 168/USD1 (i.e., the date of the signing of the MoU), whereupon the revised RoE and RoEDC shall apply for the remainder of the Term of the PPA.
e) Company shall convert its PPA to take and pay basis, without exclusivity, when the competitive trading arrangement is implemented and becomes fully operational, as per the terms stipulated in the Generation License. The Power Purchaser, in the interim, shall work towards providing access to the bilateral market at the earliest and the Government of Pakistan shall actively support the creation of a competitive power market.
f) The resolution of the dispute as to alleged savings in tariff components as, inter alia, alleged in the report dated 16th March 2020, titled “Government's Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap” notified by the Government of Pakistan vide IPP-01(12)/2017 dated 7th August 2019, allegedly in violation of applicable GoP Policies, tariff determined by NEPRA and the relevant Project Agreements, will be done through arbitration in terms of the Arbitration Submission Agreement.
The terms of the PPA Amendment Agreement are, inter alia:
a) The payment of receivables to this Agreement remains an integral part of this Agreement.
b) The Parties have decided to amicably settle the Dispute relating to withheld Capacity Payments and in doing so the existing Term of the PPA will be extended by days equivalent to Disputed Period
c) Definition of “delayed payment rate” has been amended to (a) for the first sixty (60) Days, plus two percent per annum compounded semi-annually; (b) for any period thereafter, KIBOR plus four-point five percent per annum, each compounded semi-annually.
Copyright Mettis Link News
39546
