August 18, 2020 (MLN): Saif Power Limited has executed a Memorandum of Understanding (MoU) with the Committee for Negotiations (constituted by the Federal Government), revealed official notification issued by the company to Exchange.
The MoU is a commercial in-principle document that is subject to the approval of the Board of Directors of the Company and other Federal authorities and Regulatory authorities.
The notification stated that any positive differential between revenues and costs of fuel and O&M (as one-line item) will be shared 60%-40% in favor of Power Purchaser. Late Payment Surcharge (LPS) will come down to KIBOR+2.0% for the first sixty (60) days and then shall revert to KIBOR+4.5% as per the PPA.
Moreover, the payment mechanism from the Power Purchaser has to follow the PPA mandated FIFO payment principle for this rate revision to become effective. For foreign equity investment registered with SBP, the Total Return on Equity (total ROE includes ROE+ROEDC) shall be changed to 12% per annum. For local investors, the Total ROE shall be changed to 17% per annum in PKR on NEPRA approved equity at 'Commencement of Commercial Operations Date' but calculated at PKR/USD exchange rate of PKR 148/USD. There will be no future USD indexations.
As per MOU, when the Competitive Trading Arrangement is implemented and, becomes completely operational, the Company shall move to Take and Pay as per the terms defined in the Generation License.
In order to assess if the Company has made any excess profits, the reconciled numbers between the Committee and the Company shall be submitted to NEPRA, who shall hear and decide this matter in accordance with the 2002 Power Policy, tariff determination and PPA. (As per reconciliation of figures done informally with the Committee for Negotiation, the Company has no excess profit).
Payment of the receivables of the IPPs is an essential condition of the MoU. GOP along with Power Purchaser shall arrange for payment of overdue amounts and mechanism of payments. The Power Purchaser shall also ensure adherence to its contractual obligations, and GoP and Power Purchaser shall work towards resolution of the LCIA award for the company.
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