Pakistan Power: NEPRA Reviewing US$ IRR on Power Projects
- National Electric Power Regulatory Authority (NEPRA) has announced that it is currently reviewing the returns offered in the power sector, as per a public notice issued by the regulator on Oct 28, 2018.
- As per the regulator, a concept paper was prepared in Nov 2016 for providing a basis for determining IRR for various technologies, value chain of power sector (generation, transmission and distribution) and tariff regimes (cost plus, upfront). The regulator also invited comments from various stakeholders.
- In pursuant to that, NEPRA has worked out power sector returns (US$ IRR to be revised down by 1-4.5ppts for Thermal and 1-2.75ppts for Renewable power projects; see table below) for which the regulator will now hold a consultative session with stakeholders on Nov 21, 2018, likely to be followed by further discussions.
- As per our discussion with the regulator, this will not affect returns/tariffs awarded to the existing power projects and projects which are awarded tariffs but yet to commence operations. This has also been affirmed by our discussion with management of our covered companies having exposure in power sector and whose projects are yet to commence operations.
- If approved, this will be positive for power consumers as it will lower the per unit cost of electricity going forward. Further, it will also lower the burden on national coffer in terms of lower capacity payments on new projects as capacity payments are in-built component of power tariffs.
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