ISLAMABAD: Water and Power Development Authority (Wapda) has reportedly refused to raise a loan of Rs 25 billion to pay arrears of Net Hydel Profit (NHP) to provinces, saying that any such decision would aggravate its liquidity crisis further, sources close to Secretary Ministry of Water Resources told Business Recorder. This stance has been conveyed by Wapda Member Finance, Naveed Asghar Chaudhary to Secretary Power Division, Ali Raza Bhutta.
Wapda is currently executing the biggest developmental projects worth $ 26 billion after a span of almost five decades. These are lifeline projects for Pakistan to meet depleting water scarcity and energy security challenges.
Giving the logic of opposing the proposal of Power Division, Member Finance (Wadpa) has claimed that in the meeting held in chamber of the Speaker National Assembly, Asad Qaiser in April 2021, it was agreed that clearance of NHP arrears would be made by the Ministry of Finance through budgetary subsidy adjustment of the Power Division.
According to Member Finance, who is reportedly interested in the position of Chairman Wapda, after expiry of the term of incumbent Chairman this month (July) 2021, Wapda clearly pointed out that it was in no position to take another loan as Rs 105 billion earlier raised by it for NHP payments incurred a financing cost of Rs 11 billion, which was recently allowed by National Electric Power Regulatory Authority (Nepra) after almost five years. Wapda has still not received any payment to this effect.
Wapda argues that what is mentioned by the Power Division in its summary on NHP, there is not constitutional liability on it to take loans for payment of NHP. Wapda is merely supposed to route payments made by Central Power Purchasing Agency - Guaranteed (CPPA-G) against NHP.
“Late payment by CPPA-G resulted in build-up of arrears which was no fault of Wapda,” he added.
As a result of any additional NHP loan, Wapda says it would face liquidity and funding shortfalls for meeting essential O&M, debt servicing and equity injection needs for its operational and development projects.
“We can’t load our balance sheet with NHP loans any further as this would undermine our ability to raise further loans of approximately Rs 1.153 trillion which is quintessential for our projects,” he said, adding that any delay in arranging requisite commercial financing due to an over-burdened balance sheet can potentially affect project timelines.
Wapda has also claimed that its hydroelectric receivables from CPPA-G are consistently building up and have now reached a staggering figure of Rs 242.2 billion.
“We have been constantly requesting Power Division for early settlement of these dues as they are depleting our capacity to meet financial requirements,” he maintained.
Wapda has raised $500 million in a deal on June 4, 2021 through its debut Green Bond in international market to finance Mohmand and Diamer Bhasha dam projects. This is a 10-year bond with a coupon 7.50 percent per annum to be paid annually till maturity and any delay to meet this need would have serious repercussions on Wapda’s financial viability and timely completion of its projects.
“We have already requested Power Division to increase Wapda’s monthly share to Rs 5 billion to meet this need,” he continued.
Chaudhary further argued that Wapda’s Return on Equity (RoE) has been slashed to 10 percent. The organisation needs additional financing to meet this gap. Any further NHP loan would aggravate Wapda’s liquidity issues further.
Copyright Business Recorder, 2021