ISLAMABAD: Central Power Purchasing Agency- Guaranteed (CPPA-G) is likely to negotiate with CPEC IPPs to accept payment of Rs 50 billion in the form of Pakistan Investment Bonds (PIBs) and Sukuk based on the terms and conditions of currently available offers by the Ministry of Finance, well informed sources told Business Recorder.
Sharing the details, sources said the Prime Minister held two meetings - on January 14 and January 26, 2022 - prior to his visit to China. During discussions, the Power Division was directed to process the case for release of Rs 100 billion to CPEC IPPs against their receivables.
A follow-up meeting was held in the Finance Division (FD) under the Federal Minister for Finance on February 02, 2022, wherein it was reiterated that the receivables by CPEC IPPs be cleared on priority and a case be placed before the ECC for release of the remaining Rs50 billion to CPEC IPPs as they were under massive pressure due to increasing price of inputs especially imported coal.
The sources said information had been sought from the CPPA-G, according to which Rs217.51 billion was payable against 12 CPEC IPPs as on February 24, 2022.
The sources maintained that power sector was currently faced with unprecedented cashflow constraints due to escalation in the prices of global fuel, increasing capacity payments owing to induction of new capacity (especially under CPEC projects) and the need for increasing consumer-end tariff. Any further payment beyond the set order will not be possible without injection of cash flows by the Finance Division. Consequent to the Prime Minister’s visit, the CPEC IPPs are now pressing hard for payment of their pending receivables.
According to Power Division, it is not in position to process further releases in this regard unless a supplementary grant is approved by the ECC as agreed during meetings with the Finance Division, adding that on the advice of the Finance Division and with the approval of the Cabinet, Power Division released Rs50 billion to the CPEC IPPs on January, 27, 2022.
Power Division further contends that the government has recently negotiated with various IPPs, convincing them to revise the agreements towards the benefit of the government of Pakistan. Overtures were made towards CPEC IPPs to look into the possibility of getting tariff discounts from them. It was indicated that any such action on the part of the parties would be against the spirit of CPEC Framework Agreement and would also seriously affect the allied contracts under the framework. Hence, no concession from CPEC IPPs is on record so far.
The sources maintained that the budgeted subsidy balance- after adjustment of Rs50 billion as first tranche against Current Financial Year (CFY) Tariff Differential Subsidy (TDs) claims amounted to Rs140 billion on January 31, 2022. Out of this, only Rs10 billion is available under the head of TDS, which is way short of meeting the pending TDS claims, let alone catering for the upcoming demand. Pending TDS claims for Oct-Dec 2021 stand at Rs35 billion.
Power Division added that to keep the power sector afloat and to fulfil the fuel supply requirements, power sector subsidy claims needed to be released on urgent basis. For this an additional supplementary grant of Rs50 billion is required to be released. Moreover, release of Rs50 billion as second tranche will help manage fuel supply of coal-based power plants mainly CPEC plants.
Power Division requested the ECC to approve the following: release Rs100 billion as Supplementary Grant (SG) of Rs50 billon under the head of TDS and Rs50 billion by way of SG as investment in Discos. The ECC has approved Rs50 billion SG for payment to CPEC IPPs.
Power Division has also sought permission for CPPA-G management to negotiate with CPEC IPPs to accept the payment of 50 billion in the form of PIBs and Sukuk based on the terms and conditions of currently available offers by the Ministry of Finance (Rs25 billion each).
Copyright Business Recorder, 2022