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ISLAMABAD: The government has decided to pay about Rs 190 billion to the IPPs of pre-1994 policy, 1994, 2002 and 2015 policies as equity of power Distribution Companies (Discos) instead of outstanding subsidy, well informed sources told Business Recorder.

On November 15, 2021, the Economic Coordination Committee (ECC) of the Cabinet headed by Omar Ayub Khan approved payment of Rs 134.783 billion to clear remaining agreed amount of 20 Independent Power Producers (IPPs) by December 3, 2021.

On September 28, 2021, Federal Cabinet approved Rs 52.4 billion as first installment of 11 IPPs of Power Policy 2002 on Sep 28, 2021. These revised contracts have already been approved by ECC, CCoE and Federal Cabinet during the second week of February 21 after lot of a deliberation and effort.

The ECC has also approved payment of undisputed amount of about Rs 9 billion to M/s Nishat Chunian of renowned businessman Mian Muhammad Mansha.

“There was a dispute between Finance Division and Power Division on the head of payment. Finance was opposing to book the amount to be paid to the IPPs in the equity of Discos. This dispute has been resolved by the ECC, by allowing Power Division to book the amount in equity,” the sources added.

ECC approves Rs134.783bn for payment to IPPs, Rs4.785bn to ECP

The outstanding amount as duly verified by CPPA was Rs 224.638 billion, of which Rs 89.860 billion, 40 per cent, as first instalment has already been paid to the IPPs. Of this, Rs 29.951 billion 1/3 was to be paid in cash, PIBs and Sukuk, respectively.

The break-up of Rs134.783 billion, i.e., 60% of total amount as second instalment is as follows: (i) Hubco (RFO)- Rs 34.789 billion; (ii) Kapco (gas/ RLNG&RFO, Rs 59.4 billion; (iii) Rousch (gas/RLNG)- Rs 8.533 billion; (iv) Fauji (gas/ RLNG) Rs 2.637 billion; (v) Pak Gen Power (RFO)- Rs 9.8 billion; (vi) Lalpir Power (RFO)- Rs 9.289 billion; (vii) KEL (RFO)- Rs 2.984 billion; (viii) Saba Power (RFO) 1.078 billion; (ix) FFC Energy (wind)- Rs 2.072 billion; (x) ACT(wind)- Rs 0.978 billion; (xi) Artistic Energy ( wind)-Rs 1.362 billion; (xii) Harapa (Solar) – Rs 0.095 billion; (xiii) AJ Power ( solar) –Rs 0.040 billion; (xiv) RYK Mills( Bagasse)-Rs 0.314 billion; (xv) JDW Sugar Mills Unit-II( bagasse0 Rs 0.696 billion; (xvi) JDWQ Sugar Mills Unit-III( bagasse)- Rs 0.598 billion; (xvii) Hamza Sugar Mills (bagasse ) –Rs 0.093 billion; (xviii) Thal Industries Corporation (bagasse)-Rs 0.067 billion; (xix) Almoiz Industries Limited(bagasse) Rs 0.0138 billion; and (xx) Chanar Energy Limited (Bagasse ) Rs 0.0486 billion.

The sources said of Rs 134.783 billion, Rs 44.297 billion will be paid in cash, PIBs and Sukuks each.

On November 10, 2021, Deputy Secretary (Finance Division), Shahnaz Akhtar supported the proposal of Power Division on payment of Rs134.783 billion.

He said, Supplementary Grant (SG) or Technical Supplementary Grant (TSG) of Rs.134.783 billion may be provided to Power Division subject to the condition that this amount will be booked in the respective Discos against the outstanding subsidy claims of power sector pertaining to FY 2019-20 and FY 2020-21.

Further, SG/TSG of the said amount should be released to respective IPPS after completion of all codal, legal formalities/ pre-requisites and tax, and NAB-related issues, if any.

Finance Division maintained that SG/TSG will be provided to Power Division in the following way: (i) TSG of Rs.77.760 billion through surrendering of equivalent amount from Finance Division’s Demand No.45 for making payment in November, 2021; and (ii) SG of Rs.57.023 billion will be provided during the month of December, 2021, keeping in view the financial constraints.

Regarding issuance of PIBs equivalent to one-thrid of payable amount to IPPS, Finance Division has clarified that Government of Pakistan does not issue 10-year floating rate Sukuk. Furthermore, existing Sukuk has have already been exhausted.

Power Division seeks Rs134.8bn TSG to clear IPPs’ dues

Therefore, Finance Division proposed the following amendment in case of Sukuk issue while PIBS information and cash position will remain the same: (i) issue date October 29, 2021; (ii) maturity date- Oct 29,2026; (iii) coupon rate- Annualized Weighted Average Yield of 6-month T-Bills-0.10% p.a.; (iv) Coupon Payment Frequency-semi-Annual; (v) Principal Payment- Bullet Payment on Maturity; and (vi) Price-equal to par value.

Finance Division requested the Power Division that the following may also be added to the summary: “in case of unavailability of 6-month T-Bill rate in previous auction, PKRV of relevant tenor as defined in SBP guidelines will be used to determine coupon rate of Sukuks and PIBs”.

Moreover, regarding payment to IPPs as per approved mechanism, i.e., 1/3 cash. 1/3 PIBs, 1/3 Sukuk, Power Division was asked to consult Debt Wing (Finance Division) for initiating working and coordinating with SBP and the requisite information will be shared with Power Division for necessary action including the following and same information would also be required regarding payment of Rs.58 billion to IPPs under 2002 Policy: (i) vetting of mapping information; (ii) provision of required documents to Finance Division with the approval of competent authority; and (iii) arrangement of debit and credit authorities from those concerned.

The sources said issue related to head of payment is resolved at the level of ECC, now second instalment of payment will be made to IPPs of pre-1994, 1994, and 2015 and first instalment to IPPs of 2002 policy will be made in two weeks’ time.

Copyright Business Recorder, 2021

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