Non-payment of Rs42bn liabilities: Nine IPPs serve default notices on GoP

MUSHTAQ GHUMMAN

ISLAMABAD: The government of Pakistan has reportedly been served fresh notices of default by nine Independent Power Producers (IPPs) for not paying outstanding liabilities of Rs 42 billion, well informed sources told Business Recorder.

The nine IPPs are: Atlas Power, Liberty Power Tech, Nishat Chunian, Nishat Power, Orient Power, Sapphire Electric Company, Halmore Power, Saif Power and Rousche Power.

These IPPs claim that their operational capacity has massively been hit by non-availability of credit to purchase fuel to run plants.

The sources said the power purchaser ie NTDC has defaulted to the tune of Rs 42 billion to nine IPPs which is discriminatory.

The IPPs have served default notices to GoP at a time when the power sector is subjected to street riots that are increasingly becoming violent. The government reportedly released funds to four IPPs for power generation on diesel at a cost of Rs 18 per unit only for half day.

Official documents suggest that Managing Director, PPIB, who according to the IPPs, is just a postman, recently briefed PPIB Board that as a result of long delays in payment to IPPs, many IPPs had served notices of default to power purchaser and some IPPs also served demand notices upon PPIB/GoP under the GoP guarantees. A number of meetings were held amongst the stakeholders including PPIB, the power purchaser and representatives of IPPs.

In order to resolve the issue, settlement agreements outside the PPAs were entered into between 9 IPPs, the power purchaser and PPIB on September 27, 2011 to ensure continued operations of the IPPs and avoid default of the GoP.

As a result, the notices of default served by the IPPs on the power purchaser and the GoP, under the GoP guarantee stand withdrawn. The duration of these settlement agreements was extended up to January 31, 2012.

After hearing the arguments, Minister for Water and Power, who is also the chairman of the Board, stated that every one is aware of the issue and the GoP is making efforts to resolve the issue.

The government recently released Rs 136 billion to the IPPs and Chashma Nuclear Power Plant (Chusnupp) to ease the burden of inter circular debt but recent power outages show that the issue has resurfaced.  

The government has injected Rs 1 trillion in the power sector during last three years on account of subsidy and line losses.

Banks maintain that their exposure to the power sector has already reached 30 percent of total investment and are refusing further exposure.

Chairman Independent Power Producers Advisory Counsel, Abdullah Yousuf was not available for comments.

The sources said Wapda, Hubco, Kapco and KESC owe Rs 152 billion to Pakistan State Oil (PSO) which is also facing problems in payments to suppliers.

Unconfirmed reports suggest that PSO has also requested the government to release at least Rs 70 billion immediately to improve its liquidity position.

The PPIB official stated that the entity is unconcerned about the default notice served by the IPPs, saying that it’s a routine matter. According to him, situation would worsen when they seek encashment of GoP guarantees.