HUBC has signed an MoU with the government (Committee for Negotiation with IPPs) for its 1,292MW Hub Base plant. Given that the Base plant does not fall under any Power Policy (having been commissioned prior to formation of Power Policy 1994), this is a negotiated MoU, with terms much less severe vs. those recently agreed to by IPPs under the 2002 and 1994 Power Policies. The successful implementation of the MoU is hinged upon the receipt of overdue receivables of IPPs and subsequent gradual transition to a new power distribution landscape called Competitive Trading Arrangement.

Salient features of the MoU

O&M tariff reduced

Hub plant’s existing fixed O&M only has been agreed to be reduced by 11% unlike the 11% reduction in overall capacity payments (CPP) for plants that fall under the 1994 PP.

Indexation on O&M continued

Existing indexation is to be continued on fixed O&M component in the CPP.

Indexation on PCE removed

The PKR/US$ and US CPI indexations on the PCE (Project Company Equity or ROE) will be discontinued. The PKR/US$ exchange rate has been stalled at PKR168.6 from here. While this limits indexation, the base plant’s unique U-shaped tariff will remain applicable and should moderate the overall decline.

Overdue receivables to be paid by GoP

This will be reflected in the final agreement to be signed within a six months duration.

Source: Company Announcement