According to PNG Power Ltd, renegotiation and reviews of current contracts with independent power producers (IPPs) make the business healthier and more competitive (PPL).
PPL managing director Flagon Bekker made the statement in response to questions raised by IPP industry groups (IP3) about PPL unilaterally reviewing and renegotiating current contracts and contractually negotiated prices to supply electricity to the grid.
IPPs, according to Bekker, must be adaptable enough to evolve as fiscal, technical, and environmental factors change with time.
“We asked IPPs to respond to a survey late last year where we asked them for their suggestions and next steps in dealing with the current commercial status quo,” he said.
“In fact, we offered four or five alternatives to renegotiation. None responded.”
According to Bekker, analysis shows that in terms of pricing, spending, and the overall economy, it is best to keep IPPs' share of the total market minimal.
“Egypt is the best example of countries that have kept IPPs to a smaller share of the total (market) and found it easier to weather macro-economic shock and have greater freedom in deciding where to source finance for power investment in the future,” he said.
“The IPPs not only make the macroeconomy weaker, but they are also the cause of their own problems.
“PPL is leading to change this.
“IPPs should not resist.
“They should partner by suggesting solutions for the future.
“PPL will send the survey out again and we hope they respond this time.”
According to Bekker, there was a lot of analysis and support focused on post-negotiation evaluations, which shows that the renegotiation process contributes to the discovery of lessons and eventually the execution of those lessons.
“Off the top of my head, here is a list of countries that have renegotiated PPAs in full or in part over the years: Philippines, Brazil, India, Argentina, Mexico, Turkey, Poland, China (among others),” Bekker said.