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ISLAMABAD: Hub Power Company (Hubco) initialed the proposed agreement on Monday whereas negotiations with another group of IPPs led by Mansha are in the final stages. "As we get initials from the remaining IPPs, pacts will be submitted first to the CCoE/ECC and then

Cabinet for final approval," said, Tabish Gauhar, SAPM on Power.

More than three dozen IPPs have initialed the agreements and after M/s Hubco, the government believes that progress is quite significant.

"We have now reached the claims of Rs 350 billion. Negotiations with the Mansha-led group is also at an advanced stage. We hope after reaching a consensus with this group, we will touch Rs 400 billion payment. The process will be completed this week as pre-audit of payments is also a prerequisite," he added.

In reply to a question, he said that 1200MW Hubco has agreed to settle the claim of Rs 10 billion through local arbitration with other companies, which implies that the government will pay Rs 60 billion to Hubco.

"We asked Hubco to set aside the dispute of Rs 10 billion and it will be a resolved through local arbitration. If decision will be in favour of Hubco, government will release the amount,” he continued.

The payment to be made to the power companies under the agreement is in two instalments as follows; (i) Kot Addu Power Company (Kapco), Rs 100 billion, of which 60 per cent share is of Water and Power Development Company (Wapda); (ii) Lalpir Power Limited/ Power Gen, Rs 30 billion, (iii) Rousch , Rs 14 billion, (iv) Orient, Rs 7 billion, (v) Atlas Power, Rs 16 billion and (vi) Hubco( Narowal), Rs 16 billion.

Answering a question, Tabish Gauhar said the government has also asked Hubco to hold talks on early termination of contract. Hubco has offered the government to deduct Rs 10 billion from final payment against termination of contract.

"If this deal is done, the government will deduct this amount and arbitration will be done away with," he maintained.

According to the agreed mode, payments would be made in 2 instalments. First instalment of 40% will be of around Rs 180 billion - 1/3 in cash, 1/3 5-year Sukuk and 1/3 10-year PIB and will be cleared next month. The second instalment of 60% - Rs 270 billion, of which 1/3 will be cash, 1/3 10-year Sukuk and 1/3 10-year PIB. Second instalment will be made in August or September this year.

The sources said, though IPPs have some reservations on value of PIBs, the government has made it clear that taxation on holding PIBs/Sukuks cannot be done due to international restriction on tax exemptions. Alternatively, the government has changed 1/3 instrument into Sukuk so that loss is minimized.

However, for sales tax the matter of payment mechanism is to be as per the satisfaction of IPPs.

PIB coupon rate will be weighted average yield of T-Bill + 70 bps whereas Sukuk/PIB will be the floating rate. State Bank of Pakistan and Ministry of Finance (MoF) will sit together with leading banks to minimize any loss due to sale of PIBs. The receivables will be adjusted at per value of PIB/Sukuk.

Copyright Business Recorder, 2021

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