ISLAMABAD: Finance Ministry has urged Power Division to address excess profitability by Independent Power Producers (IPPs) under China-Pakistan Economic Corridor (CPEC) at par with settlement with other IPPs, well informed sources told Business Recorder. Finance Ministry raised the issue of CPEC–IPPs, while offering comments on one of the summaries of Power Division regarding opening of Revolving Account for the Chinese IPPs.
Recently, Prime Minister Shehbaz Sharif directed Power Division and Finance Division to convince Chinese power projects established under CPEC for staggering the payment of their outstanding dues of about Rs 350 billion.
During the meeting, issues faced by Chinese companies in respect of non-CPEC projects, and steps being taken to address these issues along with timelines also came under discussion. Chinese embassy and Chief Executive Officers (CEOs) of power projects are continuously writing to all the concerned authorities and seeking their help for payment of their dues, pending since long.
Minister for Planning, Development and Special Initiatives, Ahsan Iqbal, also wrote a letter to Prime Minister about the issues being faced by the Chinese companies in Pakistan.
According to the Minister, the Embassy of China, as well as, Chinese companies operating CPEC-IPPs have been repeatedly approaching Ministry of Planning Development & Special Initiatives (MoPD&SI), and CPEC Authority to agitate the rising volume of their receivables from Central Power Purchasing Agency (CPPA-G), on account of sale/ transmission of electricity.
The Minister has claimed that during a recent meeting, the Chinese Embassy stated that the receivables of the 10 commissioned IPPs currently stand at Rs 300billion, adding that coincidently the exponential rise in the prices of imported coal has aggravated the liquidity situation of these IPPs, forcing at least three units (1600 MW approx.) to shut down. There are multiple alerts for closing of further capacity in days to come because of the liquidity crunch.
Chinese power companies have also expressed their apprehension that they may face bank default towards their lenders, if payables are delayed any further. The persistent delay in payments to CPEC-IPPs has already resulted in Chinese Sinosure’s unwillingness to process any new projects in Pakistan.
Iqbal in his letter requested the Prime Minister to issue appropriate instructions to Power Division and Finance Division to make necessary payments to ease the liquidity situation of CPEC-IPPs.
On the proposal of Minister for Planning, Development and Special Initiatives, the Prime Minister directed that Power Division and Finance Division negotiate with CPEC IPPs to agree to a staggered payment schedule or other suitable modalities for payment of their outstanding dues and submit a comprehensive proposal at the earliest.
Following the decision, Finance Ministry has asked Power Division to convene a meeting with stakeholders and submit compliance report to Prime Minister’s Office.
However, Finance Ministry maintains that “in line with settlement with other IPPs, the issue of excess profitability in the case of CPEC-IPPs may also be duly addressed by the Power Division and consequent upon settlement, necessary adjustment be made against their receivables from CPEC-IPPs or alternatively any support provided by the Chinese side may be aligned with the Revolving Account.”
Copyright Business Recorder, 2022