Delay in signing of deals irks cabinet body 20 March 2022

ISLAMABAD: Policymakers have raised serious concerns about the long delays in approving agreements with K-Electric and asked the Power Division to put the agreements to them for final approval.

Sources reported that K-Electric plans to enter into power supply agreements with state-run entities.

In a recent Cabinet Committee on Energy (CCOE) meeting, policymakers were irked by the delays over the last few months.

Asad Umar, the federal minister for development, planning, and special initiatives, chaired the meeting that discussed the circular debt in January 2022 as well as its implications.

For consideration by the cabinet body, the Power Division presented the monthly report of circular debt.

When discussing the dues recovery process in detail, policymakers found that utility performance lagged behind.

This year’s performance was slightly better than the previous year’s corresponding period in terms of helping to control losses in the power sector.

CCOE chairman inquires about the progress of  interconnection agreements (ICA), power purchase amendment agreements (PPAA),and related agreements with K-Electric.

Those transactions occurred while the agreements were being reviewed, according to the secretary of the Power Division. He added that they entailed massive implications and maximum possible benefits for the government were being ensured.

While the committee noted that the finalization of the deals had been delayed for many months, it recommended that CCOE consider and approve them at its next meeting.

Power purchase agreements have to be signed between K-Electric and National Transmission and Dispatch Company (NTDC). According to power division sources, however, the state-owned NTDC would like to sign an agreement to supply electricity on an ‘available basis’, while K-Electric wants to ink a contract that guarantees supply of electricity to meet rising demands in Karachi.

With the passage of time, the electricity demand in Karachi is on the rise; therefore, the port city needs a reliable electricity supply.

Umar announced earlier this week that the federal government will provide K-Electric with 2,100 megawatts of electricity by 2023 to meet the rising demand for power.

The government claimed that the country possessed surplus power which led the CCOE to shelve the plan of installing 700 MW coal-based power plant in Karachi.

K-Electric acquired land for the project after obtaining all the necessary approvals from the National Electric Power Regulatory Authority (Nepra).

Since the country has surplus electricity, the committee approved the supply of electricity from the national grid to K-Electric.

According to sources, K-Electric is experiencing low gas pressure from the Sui Southern Gas Company (SSGC).

Federal approval had approved SSGC to provide 90 million cubic feet of gas per day. Despite this, K-Electric and SSGC have yet to sign a gas sales agreement. K-Electric plants also experience low gas pressure.

The LNG (liquefied natural gas) supply agreement between Pakistan LNG Limited (PLL) and K-Electric is for 150 mmcfd. A new agreement between PLL and SSGC will enable the supply of LNG by using SSGC’s network, which has also been delayed so far.

The CCOE noted the position presented by the Power Division regarding ‘circular debt report for January, 2022’ and directed the division to place pending PPAA, ICA and other agreements with K-Electric for consideration and approval in its next meeting.

In addition, the Power Division was directed to submit a plan for improving the performance of power distribution companies in one week’s time. It also instructed the secretary of the Power Division to prepare a presentation on recovery.

This is K-Electric’s version

K-Electric’s spokesperson told The Express Tribune the company is negotiating with the government of Pakistan and its stakeholder groups, including the finance and energy ministries, to resolve the Energy Purchase Agreement (EPA), Interconnection Agreement (ICA), and Tariff Differential Subsidy (TDS).

These agreements have been initialed and agreed upon between the parties following extensive consultation, but some items require approval and decision by the Cabinet Committee on Energy (CCOE).

“We understand that the Power Division is preparing a summary for presentation to the CCOE, and all stakeholders are looking forward to its response,” he said.

Moreover, Saudi Arabian and Kuwaiti investors have grown significant stakes in K-Electric since it was privatized in 2005, and recently met with members of the federal government and obtained their full support.