Projected savings of Rs1.567trn: Nepra clears revised PPAs of four GPPs

Business Recorder

25-04-2025

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Thursday approved, in principle, the revised Power Purchase Agreements (PPAs) of four government-owned power plants (GPPs), with projected savings of Rs 1.567 trillion over the life of the projects. Estimated savings during the current fiscal year are expected to be Rs 21.56 billion.
The four projects included in the revised PPAs are: (i) National Power Parks Management Company – Balloki (1223MW); (ii) National Power Parks Management Company - Haveli Bahadur shah (1230 MW); (iii) Central Power Generation Company Limited - 747 MW (747 MW) and; (iv) Northern Power Generation Company Limited (525 MW)- Nandipur.
During a public hearing chaired by Nepra Chairman Waseem Mukhtar, CPPA-G CEO Rihan Akhtar informed the Authority that the revised agreements for the RLNG-based power plants (Balloki and Haveli Bahadur Shah) will take effect from January 1, 2025. The revised PPAs for Nandipur and Guddu 747 MW will become effective on February 1, 2025. He clarified that no changes have been made to the lifespan of the projects.
Tanveer Barry, representing the Karachi Chamber of Commerce and Industry (KCCI), asked how the revised PPAs would affect capacity payments, which currently stand at Rs 2 trillion, and what direct relief consumers might expect on electricity bills.
Arif Bilwani sought detailed figures on the current and revised capacity payments for the GPPs, and the estimated annual and lifetime savings. Rehan Jawed proposed using a blend of RLNG and indigenous fuels to further reduce generation costs, while Aamir Sheikh asked whether the project life spans would be extended under the new agreements.
The plant-wise estimated saving impact will be as follows ;(i) CPGCL-747 (Rs 0.2482 per unit) ;(ii) NPGCL-Nandipur (Rs 0.3216 per unit ;(iii) NPPMCL-Haveli Bahadr Shah (Rs.0.2725 per unit) and ;(iv) Balloki Power Project (Rs 0.2600 per unit)
On a question from Chairman Nepra, the officials stated that Guddu 747 MW is being operated without insurance as a couple of attempts to get it insured remained unsuccessful. Member KPK grilled the officials for not clearly giving a response that the plant is running without insurance which is great risk.
In response to a question raised by Member (Law) NEPRA, Amina Ahmed, CEO CPPA-G stated that there are indications that all government owned Gencos except Guddu and Nandipur will be decommissioned. Both Guddu and Nandipur are on the privatisation list for the second phase.
According to CEO CPPA-G, cardinals of negotiations are as follows:(i) RoE foreign fixed at 13 per cent at Rs 168/$ with no future indexation whereas RoE beyond 35 per cent shall be paid on units delivered (ie, take and pay) basis; (ii) insurance component as per actual or 0.9 per cent of the EPC for Gencos whichever is lower. Insurance component as per actual or 0.8 per cent of the sum insured for GPPs, whichever is lower; (iii) Indexation-O&M: local O&M shall be indexed at 5 per cent or 12 months' average NCPI whichever is lower; 30 per cent discount on foreign O&M indexation in case of Rupee devaluation against US dollar and 100 per cent benefit will be passed on to the consumers in case of Rupee devaluation against US dollar.
Responding to another question, CEO CPPA-G explained that during talks on the revised PPAs of GPPs it was felt that the projects are low cost and running on dedicated gas, these must have insurance component which was capped at 0.8 per cent, adding that payment of insurance will be made at that time when they will do insurance and incurred cost will materialise. He requested that the provision of 0.8 per cent insurance cost be allowed/approved in the revised PPAs. The purpose of this step is to ensure that the project's operation should not be suspended in any eventuality.
The CEO CPPA-G submitted the following proposals before the Authority: (i) RoE & RoEDC be revised at 13 per cent at fixed exchange rate of Rs 168/$; (ii) hybrid take and pay mechanism be approved beyond 35 per cent on units delivered basis ;(iii) O&M local indexation be allowed; lower of 5 % or annual average NCPI (annual); and (iv) O&M foreign indexation be allowed as per revised mechanism. The CEO said that reduction in CPP will directly impact reduction in capacity charges imposed on Discos.
According to an official statement, further reforms include capping the indexation for Operations & Maintenance (O&M) costs to 70% of rupee devaluation, down from the previous 100%. Local O&M expenses will now be indexed to either 5% or the 12-month average of the National Consumer Price Index (NCPI), whichever is lower. Additionally, the return on equity (ROE) structure has been rationalized. Plants will now receive 35% of the ROE as fixed, with the remaining 65% linked directly to the actual operation of the plant — a significant departure from the previous 100% guaranteed ROE model.
These prudent measures will result in a projected saving of Rs. 1.6 trillion over the life of the projects, including Rs. 22 billion in the current financial year alone.
The hearing, attended by sector professionals and members of the public, was met with wide appreciation. Citizens commended the Authority's commitment to fiscal responsibility and its proactive role in ensuring a sustainable and consumer-friendly power sector. The Nepra remains steadfast in its mission to implement reforms that ensure transparency, efficiency, and affordability in the power sector.
The Nepra will issue detailed determination on the revised pacts within a couple of weeks after verification of all denouements.
Copyright Business Recorder, 2025