Debt repayment to banks: Nine IPPs default

MUSHTAQ GHUMMAN

ISLAMBAD: Deeply concerned over the deteriorating power sector's financial affairs, nine IPPs that had invoked GoP guarantees, have defaulted on debt repayment to banks due on March 31, 2012, well-informed sources in the Ministry of Water and Power 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.

Prime Minster Syed Yousuf Raza Gilani is chairing yet another Energy Conference in Lahore on Monday (today) amid Chief Minister Punjab's accusations that Punjab is receiving step motherly treatment in terms of power supply.  

The sources said that total payable amount to lenders from nine IPPs on March 31, 2012 is an estimated Rs 7.5 billion.

"IPPs have not received money from the Power Purchaser i.e. NTDC and they do not have adequate balances in their accounts to make such payments," the sources added. They further revealed that the IPPs have intimated this to the Ministry of Water and Power, Private Power Infrastructure Board (PPIB) and NTDC - entities responsible to ensure payments to private units supplying power to the NTDC.

"There is no doubt that non-payment to the IPPs is now hurting the banking industry as banks maintain that their exposure to the power sector has already reached 30 per cent of total investment and are refusing further exposure," the sources maintained.

Recently, the GoP had been served fresh notices of default by the nine IPPs for not paying outstanding liabilities of Rs 42 billion.

"The IPPs have invoked guarantees because they have not received any payment and secondly all IPPs had informed GoP in advance that they will miss March 31 deadline," the source continued.

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

Official documents suggest that Managing Director, PPIB, who, according to the IPPs plays the role of 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 to 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 nine IPPs, the power purchaser and PPIB on September 27, 2011 to ensure continued operations of the IPPs and avoid default of the GoP.

The government has injected Rs 1 trillion in the power sector during last three years on account of subsidy and line losses which the power sector analysts portray as incompetence of policymakers and executers as well. Officials in the Ministry of Water and Power point the finger of blame on the Finance Ministry which has employed delaying tactics in the release of subsidy and other committed resources.