PPIB urges SBP to resolve CPHGC’s forex issues

ISLAMABAD: The Private Power & Infrastructure Board (PPIB) has urged the State Bank of Pakistan (SPB) to resolve foreign exchange issues of China Power Hub Generation Company (CPHGC) to avoid an embarrassing situation.

In a letter to Executive Director, Exchange Policy Department, State Bank of Pakistan (SBP), Managing Director, PPIB, Shah Jahan Mirza referred to the letter of Chinese power company written on February 6, 2023 wherein the Company stated that it is facing severe delays in executing its foreign payment obligations towards its fuel suppliers and O&M contractor due to unavailability of foreign exchange; and that its Authorized Dealer, named as Standard Chartered Bank (SCB), vide its letter of February 2, 2023 has specifically mentioned that they are not in a position to arrange foreign exchange for pending payments of the Company amounting to $ 40.44 million for imports/commercial remittances.

Further, SCB has also highlighted that the current foreign liquidity issue creates significant risk on Company’s upcoming debt repayment installment of around $ 82 million which is due in April 2023.

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Managing Director, PPIB, who is facing Chinese government’s ire for his failure to honour commitments with Chinese companies, in his letter stated that the company owns a 1,320 MW imported coal power project under the CPEC framework, adding that non-availability of requisite foreign currency would result in lapse of consent under IA that would expose GOP to various potential litigations.

Pursuant to provisions of Implementation Agreement (IA), it is the responsibility of GoP to make available through SBP foreign currency not available through normal banking channels within specified time; it will create embarrassing situation for GoP wherein a CPEC project defaults under the Financing Documents due to non-availability of foreign exchange.

Chief Executive Officer (CEO), CPHGC, Ren Lihui, in his letter to MD PPIB sought his intervention and measures in consultation with relevant authorities under section 10.4 of IA to make the availability of foreign currency on urgent basis.

“Inability to arrange foreign currency will result in disruption of services under various agreements and as a consequence of failure to make such payment(s) relevant contractors can initiate the legal proceedings against the company for not complying with the terms of the respective agreement(s),” said CEO of Chinese company.

On March 7, 2023, the Prime Minister Office (PMO) directed the Power Division to hold a meeting with Special Assistant to Prime Minister on Power, Zafaruddin and sort out issues related to establishment of Revolving Account meant to facilitate payments to Chinese power plants established or being established under the CPEC initiative. Chinese embassy in Pakistan has also raised the issues of Chinese power companies repeatedly with the Prime Minister, Finance Minister, Prime Minister’s Special Assistant on Coordination, Syed Tariq Fatemi and other concerned authorities but their concerns are still unattended due to forex crisis.

Copyright Business Recorder, 2023