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ISLAMABAD: Water and Power Development Authority (Wapda) Chairman Lt-Gen Muzzammil Hussain Tuesday informed the Supreme Court that the federal government had not paid Rs240 billion despite its commitment.

“Despite giving undertaking before the Supreme Court, the Power Division has not released outstanding receivables by Central Power Purchasing Agency-Guaranteed (CPPA-G) which currently stand at Rs240 billion hinging our equity contribution,” said the report submitted by the Wapda chairman on Mohmand and Diamer-Bhasha dams. A five-member bench, headed by Chief Justice Gulzar Ahmed, heard the implementation of the Supreme Court directives to the Wapda. Lt-Gen Muzzammil told that despite the Covid-19 pandemic and security issue they were progressing with the projects, adding Mohmand Dam would be completed by February 2025, and Diamer Dam in 2029.

He said the Wapda was actively following up with the Power Division for early payment of outstanding receivables, which needed to be ensured so that the development work on the project site was not hampered.

The chief justice directed the Additional Attorney General, Sohail Mehmood, to get instruction from the government, and file the report.

It apprised that the foreign currency requirement of the projects is US$714 million.

The foreign currency requirement for the next two years for Diamer Bhasha Dam (DBD) and Mohmand Dam is US$ 600 million.

“We are in the process of arranging the financing from international financial markets through Green Eurobond, which is a natural instrument of choice as its tenor of 7-10 years closely matches the long gestation period of our projects.”

This would be a regular feature of our financing strategy and we will access the market through a programme of issuances in a phased manner. The government is also pleased to give its consent in the shape of a letter of comfort. “Initially, we are approaching the market for a debut benchmark size of US$500 million and successfully undertook two round NDR (Non-deal Roadshow) to garner investors interest,” said the report.

It stated that as investors rely heavily on rating agencies in making investment decisions Wapda undertook international issuer credit rating by engaging all three major rating agencies namely S&P, Fitch, and Moody’s.

It is a matter of great pride that the Wapda has been equalised with the federal government on Long-Term Foreign Currency Issuer Default Rating of “B” with Stable Outlook by all three rating agencies.

The equalisation of rating with the GoP by any sub-sovereign entity in Pakistan is the highest possible rating attainable and is a reaffirmation of the Wapda’s credibility, healthy financial outlook, and attractive growth prospects.

The outcome would greatly help the Wapda in its bid to diversify financing avenues, decrease reliance on government, and raise financing on competitive terms.

As the markets are currently receptive and immediate foreign currency needs are arising at the project site, the Wapda initiated the process of hiring the Lead Arranger/Global Coordinator and co-book runner through a competitive bidding process by issuing REP in a leading newspaper.

Five leading international banks, JP Morgan, Standard Chartered, and Citibank submitted the proposal.

On the basis of evaluation results, a consortium of three banks has been formed with JP Morgan as the Global Coordinator, and other two banks namely, Standard Chartered and Deutsche Bank as co-book runners.

The idea behind developing a consortium of three banks is to take full advantage of increased distribution and marketing capabilities and minimise the execution risk for the Wapda’s debut US$500 million Eurobond issuance.

The pricing rationale proposed by co-book runners has indicated a spread in the range of 40-60 basis points (bps) over sovereign yield.

The ECC has already accorded approval for issuance of the bond and the same was ratified by the cabinet.

The Wapda is currently in the process of finalising the necessary documentation including the offering circular, subscription agreement etc with the Global Coordinator, and joint book runners and the international and local counsels.

Simultaneously, due diligence is underway for the Green Bond Framework and international credit rating for the issue.

Once the documents are finalized, which is expected by mid-February, we will have a round of virtual deal roadshows before formal issuance towards the end of the month.

The report said that the negotiations with international financial institutions/banks are underway. The launch of the Green Euro Bond got delayed due to the Broadsheet case verdict as the government is presently reluctant to allow access to foreign financial markets. The case was adjourned for three months.

Copyright Business Recorder, 2021

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