Foreign loans of IPPs: PPIB seeks guidance to replace Libor with SOFR
ISLAMABAD: The Private Power Infrastructure Board (PPIB) has proposed the Finance Ministry to provide guidance regarding the acceptability of Secured Overnight Financing Rate (SOFR) as an alternative benchmark to LIBOR for existing foreign loans of IPPs, as well as, SOFR applicability for future foreign loans, or a Working Group may be formed having representatives from the Ministry of Finance, the SBP, the Nepra, CPPA-G, and the PPIB being the focal point to resolve the matter, sources close to MD PPIB told Business Recorder.
On November 22, 2022, the PPIB received a joint letter from eight DFIs from various Development Finance Institutions (DFIs) namely, Asian Development Bank, British International Investment plc (BII), Deutsche Investitions- Und EntwicklungsgesellschaftmbH (DEG), Nederlandse Financierings-Maatschappi-jvoor Ontwikkelingslanden N.V. (FMO), International Finance Corporation (IFC), and Islamic Development Bank (IsDB). The Export-Import Bank of Korea (KEXIM), and Societe De Promotion Et De Participation Pour La Coopération Economique S A (Proparco) have investments in Pakistan’s power sector.
According to the PPIB, various DFI’s have made investments in Pakistan’s power sector by way of extending various foreign currency denominated loans to Independent Power Producers (IPPS). These loans till now using USD LIBOR as benchmark for determination of return to these DFIs; however, as contained in the letter, USD LIBOR ceased to be applied as a benchmark for new financial transactions after December 2021 and will no longer be available for quoting after June 30, 2023.
Copyright Business Recorder, 2022
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