NPPMCL asked to get Board’s nod for debt recapitalization

ISLAMABAD: Privatisation Commission has directed National Power Park Management Company Limited (NPPMCL) to get Board’s approval for debt recapitalization and refinancing process and raising Rs 110 billion from banks/ financial institutions.

Both RLNG-fired Haveli Bahadur Shah and Balloki Power plants, owned by NPPMCL, were set up with Government of Pakistan’s (GoP) funding equity instead of the 70:30 debt-to-equity ratio benchmark allowed in Nepra’s tariff for NPPMCL’s power plants. Therefore, in order to align the capital structure with the tariff, 70% of project costs were to be based on long-term financing.

Nepra argues that any refinancing to replace the excess GoP funding and to align capital structure of NPPMCL with Nepra’s determined tariff has to be within the KIBOR + 1.8% benchmark.

The Cabinet Committee on Privatisation (CCoP) in its meeting held on December 31, 2021 approved a summary of Ministry of Privatisation with the stipulation that ceiling of debt recapitalization and refinancing shall be kept at the bench mark of KIBOR plus 1.8%. It was also directed that the process will be made through a competitive bidding. The Federal Cabinet on January 11, 2022 has ratified the CCoP decision.

The draft of Request for Proposal (RFP) to be floated by the NPPMCL after approval of the Board, says that the company intends to borrow up to Rs 110 billion approximately from financial institution(s)/ bank(s) for a period of 7 years. All commercial banks/ financial institutions regulated by the State Bank of Pakistan are eligible to submit their bids. Principal amount will be repayable on quarterly basis as Nepra’s determination of tariff.

Two RLNG-fired plants: Debt re-capitalization, refinancing likely thru local banks

Loan shall be obtained from the bidder(s) offering the lowest (fixed) spread relative to three-month KIBOR. The pricing levels (fixed spread relative to three-month KIBOR) quoted by the bidder(s) shall be encompassing and no extra fee/ cost/ expense shall be paid by NPPMCL in any case. Maximum ceiling on fixed spread will be 1.8 per cent per annum all bids quoted above spread ceiling of 1.8 per cent per annum shall be rejected.

NPPMCL may draw down the loan at any time in one or more instalments until loan amount has been fully utilized for the purposes of refinancing of the existing loans of NPPMCL, repayment of share deposit money to PDFL and payment of remaining projected related costs have been fulfilled.