Nishat Chunian Power shifts to take and pay tariff model from capacity payment system

The Board of Nishat Chunian Power Limited (NCPL) has approved the new tariff model, wherein government will only pay for the electricity bought, a bourse filing noted.

Earlier, government had to pay the power producer a fixed amount as capacity payments whether or not, any power bought or not.

This new approach will also change how tariffs are calculated for operations and maintenance (O&M) and the cost of working capital. The return on equity will also now be based on the hybrid model.

The company will also cap the insurance premium tariff at 0.9% of the EPC cost and will share profits up to the fiscal year 2023. These profits will be adjusted against receivables from the Central Power Purchasing Agency (CPPA).

Additionally, the government will withdraw arbitration unconditionally under the Arbitration Submission Agreements.

Outstanding receivables up to October 31, 2024, will be paid within 90 days after the agreement is approved by the cabinet, and any delays in payments will be waived up until the same date.

In October, the government announced that it will prematurely end power purchase agreements with five of the oldest independent power producers (IPPs).

This move is expected to save about PKR 411 billion and reduce the average electricity tariff by around 71 paisa per unit, which currently stands at about PKR 36 per unit (excluding taxes and duties).

Furthermore, IPPs established under the 2002 power policy will be moved to a 'take and pay' model from the existing 'take or pay' contracts.