Govt Successfully Renegotiates Power Agreements With 8 More IPPs

The Energy Task Force has successfully renegotiated deals with eight bagasse-fired Independent Power Producers (IPPs), which will potentially save the government Rs. 85-100 billion. The revised agreements also reduce the Rs. 22 billion tariff adjustment recently approved by the National Electric Power Regulatory Authority (NEPRA) by Rs. 8 billion, reported Business Recorder. The revised deals include major sugar mills such as Hamza Sugar Mills, Chiniot Sugar Mills, and JDW-II, among others. The rate for bagasse fuel has been lowered from Rs. 5,600 per ton to Rs 4,500, with a 5 percent retrospective deduction applied to the revised fuel cost. This adjustment is expected to impact 42 percent of the previously allowed tariffs for these IPPs. The negotiations took place over three days in Rawalpindi. Special Assistant to the Prime Minister, Muhammad Ali, confirmed that the agreements will shift pricing from a coal-linked mechanism to a PKR-based system and save the government over Rs. 100 billion in future payments. The deals also revise financial terms, including a 50 percent reduction in the working capital component and a 17 percent PKR-based return on equity. NEPRA will review and adjust tariffs accordingly, with the changes effective from October 31, 2024. This issue has been a point of debate in the Senate Standing Committee on Power, where concerns were raised about NEPRA’s previous decisions to tie bagasse power tariffs to international coal prices.