Changes to three Punjab power plants' GSAs okayed.

ISLAMABAD -- For facilitating the proposed privatisation of power plants on a government-to-government (G2G) basis, the Economic Coordination Committee (ECC) of the cabinet on Wednesday approved changes to the gas sale agreements (GSAs) of three LNG-based power projects in Punjab - Balloki, Haveli Bahadur Shah and Bhikki.

A meeting of the ECC, presided over by Finance Minister Ishaq Dar, also allowed Pakistan Railways to enter into a business deal with the private sector for laying fibre-optic cables on profit sharing. It approved urea price at Rs2340 per bag for farmers and its incidental charges of Rs594 and Rs1008 per bag for transportation from Karachi and Gwadar, respectively.

The government has been in talks with friendly governments in the Middle East for the sale of at least two LNG-based power plants - the most efficient so far - on a G2G basis to raise more than $2 billion direly needed to support the fast diminishing foreign exchange reserves.

The financial advisers on these transactions had warned that without settling issues relating to gas sale agreements (GSA), power purchase agreements (PPAs) and debt recapitalisation, the sale transactions would be affected.

ECC fixes urea price at Rs2,340, allows Railways to sign private deal for laying fibre-optic cables

The ECC was told that the previous government had in April 2021 waived the minimum 66 per cent take-or-pay commitment in GSAs and PPAs and also relieved them (practically Power Division) of the requirement of annual production plan for firm gas commitment by replacing it with monthly gas plan.

The decision practically came into practice, but related amendments to GSAs and PPAs could not be given legal effect. This delayed the privatisation of these power plants.

The Power Division now realised that given the unprecedented rise in the cost of LNG, the April 2021 decision should be revisited to optimise the utilisation of LNG for continued operations of these power plants, thus enabling their security of operations to the new buyer. Also, it proposed capping of gas sale deposit (GSD) payable by these plants to gas companies at Rs15bn per plant instead of significantly higher amount (Rs60bn) that was worked out under the existing arrangement at one-fourth price of maximum LNG allocation.

Therefore, at the request of the Power Division, the ECC approved changes to the April 2021 decision and...