ISLAMABAD: The federal government has ordered the transfer of ownership of private sector hydropower projects to the governments of Azad Jammu and Kashmir and Gilgit-Baltistan on the basis of their location on completion of a 30-year term of the private sector contracts to facilitate a 720MW project under the China-Pakistan Economic Corridor (CPEC).
The decision was taken by the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Ishaq Dar on Friday to bring uniformity among projects built under the power policies of 2002 and 2012.
Under all power policies, private sector hydropower projects built on the build-own-operate-and-transfer (Boot) model stand transferred from the project sponsor to the government of Pakistan or its nominated entities. Under the 2002 policy, the ownership was to be transferred to the federal government or the Water and Power Development Authority (Wapda) while the 2012 policy required these be transferred to the respective regional governments.
Also, the water use charge under the 2002 policy was only payable at the rate of 15 paisa per unit to the province, AJK or GB governments while this was increased to 42 paisa per unit under the 2012 policy to encourage provincial and regional governments to facilitate development of private hydropower projects.
On the request of the Water and Power Ministry, the ECC approved, in principle, the transfer of all hydropower projects (based on the Boot model) being implemented under the 2002 power policy, to the respective provincial governments after the Implementation Agreement expired.
It also allowed enhancement of water use charges (WUC) from Rs0.15/kWh to Rs0.425 for all upcoming private sector hydropower projects being implemented under the 2002 policy which have not yet achieved financial close.
It was decided that the WUC would be reviewed every five years to determine if an increase was required but without any annual currency indexation.
The Policy for Power Generation Projects 2002 announced in Oct 2002 provided that projects implemented on the Boot basis shall be transferred to federal government at the end of the concession period and the WUC will be paid by the private power generation companies to the respective provincial/AJK government at the rate of Rs0.15/kWh adjustable annually for inflation.
The 2012 policy announced in Jan 2012 envisaged the transfer of the Boot projects to the respective provincial government after completion of concession period and WUC to be increased to the rate of Rs0.425/kWh (without annual indexation) to be reviewed every five years.
The Private Power and Infrastructure Board (PPIB) is currently pushing a few hydropower projects on the Boot basis under the 2002 policy, including a 720MW Karot Hydropower project located in the dual territory of AJK and Punjab. The two governments have requested the centre to increase the WUC from Rs0.15/kWh to Rs0.425 for the said project and other upcoming hydropower projects located in AJK and Punjab being processed under the 2002 policy.
Punjab has also sought the transfer of the said project to the provincial government on completion of the concession period. The power ministry said the governments of AJK and Punjab required these provisions to be incorporated in respective project agreements being negotiated for the Karot hydropower project, one of the prioritised projects included in the CPEC agreement between China and Pakistan.
According to the ECC, signing of these agreements could potentially be delayed if the decision was not made on priority. To ensure that this was not seen as a special favour, it was decided that these concessions would require to be extended to any other upcoming hydropower project being implemented under the 2002 policy for which the financial close had not yet been achieved, irrespective of the location of the project.
The National Electric Power Regulatory Authority (Nepra) opposed the proposal, claiming that it was not clear which government or province the project would be transferred to. It said that such an arrangement should be made in the policy with consent of the respective governments and approval of the Council of Common Interest to avoid controversies.
On another proposal from the Ministry of Water and power, the ECC granted approval for authorising the Central Power Purchasing Agency (CPPA) to sign an amendment to the modified and re-stated power purchase agreement with Fauji Kabirwala Power Company.
It also granted the federal government sovereign guarantee against financing facility of Rs10.4 billion from local banks for interconnection of imported coal-based 1320MW power plants at Bin Qasim (near Karachi) sponsored by a consortium put together by former Ehtesab chief Saifur Rehman.
The ECC also allowed allocation of up to 9.5MMCFD gas from Badar-2 gas field to Sui Northern Gas Pipelines Limited (SNGPL). The price of gas would be as per the applicable petroleum policy. The decision has been taken keeping in view request of SNGPL for allocation of gas from Badar-2 owing to increasing demand and supply gap on their system.