Pakistan

Pakistan to pay PKR 560bn capacity charges to IPPs for last quarter of FY24

Several IPPs to get billions despite zero production

Pakistan to pay PKR 560bn capacity charges to IPPs for last quarter of FY24
industrial power plant skyline

Pakistan will pay billions to over a hundred power producers including those which didn’t even generated a single watt in the last quarter of FY24.

According to a document seen by Nukta, power sector regulator, National Electric Power Regulatory Authority (Nepra), has approved capacity payments worth PKR 560 billion ($2 billion) to 101 Independent Power Producers (IPPs) from April to June 2024.

As many as six generation companies with zero production have claimed capacity charges. These IPPs include the Hub Power company, Kohinoor Energy, Lalpir Power generation, Pak Gen Power Limited, Chanar Energy Limited and Thal Industries.

Certain other IPPs including Fauji Kabirwala, Rousch Pak Power, Saba Power Company, Attock Gen Limited, Atlas Power Limited, Nishat Power Limited, Nishat Chunian Power Limited, Narowal Energy Limited, Liberty Power Tech Limited, Halmore Power Generation Company, Chiniot Power Limited, Lucky Electric Power Limited produced zero in April, May, and operated at a very limited capacity in June. They will be paid billions cumulatively.

It may be mentioned here PM's Special Assistant Muhammad Ali is reportedly renegotiating the contracts with IPPs.

Recently, Federal Power Minister Awais Laghari said that the existing price structure of power in this country was not sustainable. “Discussions were under way between power producers and the government because there is a clear understanding on both sides that the status quo can’t be maintained,” the power minister added.

Nepra has approved PKR 74 billion capacity payments for Karachi Nuclear Power Plant Unit 2; PKR 23.5 billion to the Karachi Nuclear Power Plant Unit III; PKR 33 billion to Thar Coal Block l Power Generation Company including PKR 10.33 billion with 34% plant factor in April, PKR 11.56 billion with 65% factor plant in May and PKR 11.04 billion with 90% plant factor in June.

The WAPDA Hydel has also claimed PKR 29 billion capacity payments for the quarter.

The authority also approved PKR 28.25 billion capacity payment to the Huaneng Shandong Ruyi Energy including PKR 9.41 billion with 2% plant factor in April, PKR 9.35 billion with 26% plant factor in May and PKR 9.48 billion with 43% plant factor in June 2024.

It may be mentioned here country paid PKR 1.5 trillion as capacity payments to power generators in 2024 for a total generation of 125,330 GWhs, PKR 1.14 trillion in 2023 against a production of 128,645 GWhs, PKR 770.4 billion in 2022 for 134,198 GWhs, PKR 664.6 billion in 2021 for 121,796 GWhs and PKR 597.4 billion in 2020 against a production of 113,441 GWhs.

The stark increase in capacity payments over the years despite production staying at almost same levels is due to weakening local currency, as the payments are linked with dollar rate. However, in 2022, the dollar rate was fixed at PKR 165 for payments to IPPs.

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