Two RLNG plants: Banks asked for debt arrangement to successfully complete transaction

KARACHI: The federal government has asked banks for debt arrangement to successfully complete the transaction of two RLNG power plants of National Power Parks Management Company Limited (NPPMCL). Privatization Minister Muhammadmian Soomro and Special Assistant to Prime Minister (SAPM) Nadeem Baber met with the heads of local and foreign banks at the State Bank of Pakistan (SBP) here Thursday.

The meeting was attended by board members, members of Financial Advisory Consortium (FAC), deputy governor State Bank, presidents and group chiefs of NBP, MCB, UBL, ABL, Habib Metropolitan, Bank Al Habib, Bank Alfalah, Bank of Punjab, HBL, Meezan Bank and Faysal Bank.

According to ministry, debt arrangement for two RLNG power plants of National Power Parks Management Company Limited (NPPMCL) was discussed in the meeting. These banks were asked to participate as lenders to successfully complete the subject transaction.

The heads of banks were informed that some 12 IPPs were shortlisted for bidding NPPMCL was formed with an objective to reduce the electricity/power demand and supply gap in Pakistan. The government is now considering divesting up to 100 percent of its shareholding in NPPMCL to a potential investor, along with management control.

As part of the privatisation process, the potential bidders will be required to refinance government or Pakistan Development Fund Limited funding and NPPMCL's existing commercial debt through foreign and/or local debt financing. During the meeting it was informed that, in order to successfully complete the transaction, it is critical to ensure that potential bidders are able to secure sufficient PKR denominated financing. Therefore, participation of local banks is important to provide additional confidence to potential bidders for successfully closing the transaction.

The heads were to raise the requisite long-term financing within the benchmark approved by Nepra, and also support potential bidders in obtaining NOCs for continuation of Working Capital Lines, which is in addition to the long-term financing.

The minister said that considering the importance of the privatization of these power plants for the government, the Privatisation Commission would appreciate the cooperation of commercial banks/lenders to facilitate a successful transaction within the envisaged timeline.

The SAPM and Minister for Power apprised banks that the government in its reform process to address the issues of circular debt, however, due to pandemic the process remained stalled for some time. It was also discussed that negotiation with the older IPPs are in progress to find ways to address cost of generation. The banks proposed that the government may consider the terms of tariff to encourage bank interest in the subject transaction.

Copyright Business Recorder, 2020