Review of contracts vital: Bekker

By PETER ESILA
RENEGOTIATION and reviews of existing contracts with independent power producers (IPPs) makes the sector better and more sustainable, according to PNG Power Ltd (PPL).
PPL managing director Flagon Bekker said this in response to IPP industry groups’ (IP3) concerns over the unilateral review and renegotiation by PPL of existing contracts and contractually agreed pricing to supply power to the grid.
Bekker said IPPs needed to be flexible enough to adjust over time as economic, technological and environmental conditions changed.
“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.”
Bekker said research showed that it was better to keep IPPs’ share of the total market small in terms of pricing, investment and the overall economy.
“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 macro economy weaker, they are 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.”
Bekker said there were lot of analysis and support based on post-negotiation reviews that showed that the process of renegotiation leads to the identification of lessons and then implementation of those lessons learnt.
“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.