ISLAMABAD: On Thursday, the Cabinet Committee on Energy (CCoE) did not sanction the payment of Rs399 billion to independent power producers to allow all members to satisfy their consciences in three days if the finalised deals were prudent and no wrong decision was made.
The committee, chaired by Minister of Planning and Development Asad Umar, also wanted full confidence to be given to sponsors of the upcoming LNG terminal to complete their projects and cautioned some stakeholders that it would not be permissible to shift deadlines that deter private local and foreign investors.
Sources said the committee was told that “the payment mechanism with 44 IPPs had agreed to clear the outstanding payables amounting to Rs399bn as of Nov 30, 2020” by an implementation committee headed by Finance Minister Dr Hafeez Shaikh.
The balance will be billed in two instalments, as per the payment process. 40% of those payables would be charged in cash at one-third, in 5-year sukuk at one-third and in 10-year PIBs at a floating rate of T-bills plus 70 basis points at one-third. The remaining 60pc will be repaid in much the same way within six months.
Wants ample time given for completion of new LNG terminals
A report on the detailed payment mechanism and IPP-wise payable by the Implementation Committee was also attached to the summary of the CCoE. The meeting was informed that the Finance Division was part of the Implementation Committee and that “due to the lack of time and the expiry of the MoUs being the deadline of Feb 12, 2021, the summary was not circulated to the National Electric Power Regulatory Authority by the Power Division, which should provide its point of view during the meeting.”
Agreement on local arbitration
It was announced that an alternate solution to the Arbitration Submission Arrangement was already settled on for all IPPs under the 2002 Power Policy. Under this, the IPPs have agreed that this local arbitration will be binding and final as far as the conflict of excess viability is concerned, consisting of one delegate to be chosen by each party and a third by these two arbitrators.
One of the key factors negotiated with local arbitration was to escape the scenario where the IPPs may ultimately have took the case to the International Arbitration Court of London and to eliminate substantial damages to the public exchequer.
Some senior CCoE representatives decided to delay the approval by Hafeez Shaikh of the deals negotiated with IPPs on the grounds that they needed reasonable time to go through the huge packages of agreements and attachments. However, Mr. Shaikh insisted that it had to be approved by Monday at its meeting due on Feb 9 for cabinet endorsement and to allow for three more working days to complete the whole process.
Finally, the CCoE agreed that all stakeholders should take the documents home for full analysis over three holidays, considering the sensitivity and significance of the issue, and come back with specific suggestions for a final judgement expressing the common wisdom and considered stance of the government.
Therefore, it was agreed that the committee would reconvene for a final vote on the matter on Feb 8.
Advance force majeure notices
Educated sources said the core CCoE representatives shared dismay at the Petroleum Division’s shifting roles, from the issuing of NOCs to the distribution of pipeline resources and advance notifications in the event of force majeure incidents. They said that such strategies would deter private investment and could therefore give full trust to the terminal developers who had reached an advanced stage that they would not be mistreated and placed in a disadvantageous role of tremendous investment upon completion of their terminals.
The CCoE determined that the current available pipeline capacity must be assigned to each candidate, including CNG, in order to have an equal and equal playing ground for the proposed LNG terminal, following the necessary requirements for a three-month rolling basis before the new terminals hit the date of commercial service.
The meeting was told that a sub-committee on current pipeline capacity for new LNG terminals agreed that both of the new LNG terminals, Tabeer and Energas, would communicate their planned completion date within 10 days and Ogra would reserve spare pipeline capacity for short-term only before the completion date of the first of the two LNG terminals.