ISLAMABAD: Central Power Purchasing Agency- Guaranteed (CPPA-G) and M/s Hub Power Company (Hubco) have reportedly locked horns on “fairness” of payment of overdue receivables and total amount claimed by the power company.
On August 12, 2022, Chief Executive Hubco Kamran Kamal, in a letter to Secretary Power, Rashid Mahmood Langrial, accused CPPA-G of not treating Hubco fairly with respect to payment.
The power company claimed that its total overdue receivables stood at Rs 52.6 billion, of which the volume of Capacity Purchase Price (CPP) was Rs 16.652 billion, Energy Purchase Price (EPP) Rs 19.104 billion, and Late Payment Interest (LPI), Rs 16.133 billion.
However, Chief Financial Officer (CFO), CPPA-G, Rehan Akhtar has rejected claims of CEO Hub Power Company, saying that the latter’s statement of receivables is not correct as this includes the disputed amount of Rs 11.525 billion for which arbitration proceedings initiated by Hubco are pending adjudication.
CFO CPPA-G maintained that with regard to understanding of fairness, it is not sustainable from the data which shows that Hubco has been paid at 108 to 118 per cent during the period from July-2020 to August 15, 2022 as compared to verified invoices against energy and capacity. This is because the payments have been made to reduce its long outstanding receivables.
The Market Operator further stated that application of “industry-wise FIFO” is impractical because of the economic merit order system and against the spirit of the agreement. Currently, Hubco is at number 73 in the list of economic merit order and is being dispatched due to prevailing fuel situation. internationally.
Overdue receivables’ payment: Hubco accuses CPPA-G of being ‘unfair’
“CPPA-G is committed to fairly operate the cash management to meet the requirement of all the generation companies while optimizing the costs despite the current difficult international crises of fuel prices/ supply chain challenges,” CFO CPPA-G added.
Earlier, CEO Hubco referred his company’s letters dated May 18, 2022 and June 10, 2022 wherein it had highlighted the disparity in payments to it and subsequent meetings with Secretary Power and CPPA-G officials, where the company was assured that the issue of disparity would be addressed in Q1 CFY 2022-23.
According to the CEO Hubco, some additional payments were subsequently made to the company, and currently Hubco’s invoices are seven months overdue, which is significantly higher than other similar IPPs.
He said Hubco is already facing significant liquidity challenges due to its increasing overdue receivables and additional cash flow requirement for its expansion projects and the situation is further exacerbated due to this disparity in payments by the CPPA-G.
CEO Hubco, in his letter, further argued that an industry-wide FIFO in CPPA-G’s payment system is implemented to achieve fairness and transparency, which would entail the invoices of all IPPs are sorted sequentially according to their due dates and are paid in the order of their due dates ensuring that the oldest invoices in CPPA-G system are paid first, irrespective of which IPP it relates to. This concern over disparity among IPPs will automatically be resolved.
He further contended that all IPPs have working capital facilities to manage their liquidity; however, due to uncertainty of payment from CPPA-G, they continue to face liquidity challenges.
Copyright Business Recorder, 2022
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