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Print Print 2023-04-18

Import of spare-parts: Hubco concerned at forex ‘unavailability’

  • The power company faces severe challenges in importing spare parts due to which it is restrained from undertaking timely maintenance to ensure capacity
Published April 18, 2023

ISLAMABAD: M/s Hub Power Company (Hubco) has raised serious concerns on non-availability of foreign exchange for necessary spare parts, which falls within the terms of Pakistan Political Event and Force Majeure under Article 13 of PPA, well informed sources in PPIB told Business Recorder.

The power company’s CFO, Muhammad Saqib, in a letter to Managing Director PPIB has drawn his attention to the severe challenges being faced by the Company in importing spare parts for its plant due to which it is restrained from undertaking timely maintenance to ensure capacity. The issues in importing are directly attributable to the constricted availability of foreign exchange in the country.

The sources said, due to the limited availability of foreign exchange, State Bank of Pakistan vide EPD Circular Letter No. 20 of 2022 of December 27, 2022, issued a priority list for imports to restrict the use of available foreign exchange to only the most critical imports.

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In view of the critical importance of power generation for the country, energy imports were included at number II in the said priority list. However, the description of energy imports in the circular does not expressly include spare parts for power plants, as a result of which banks are not allowing the company to establish Letters of Credit (LC) or make payments for import of spare parts.

CFO Hubco argues that while availability of fuel is important for power generation, the timely maintenance and consequently the availability of required spare parts are equally critical to generate power from such fuel.

In other words, without the timely availability of spare parts, the availability of the plant for power generation cannot be ensured. Any fuel imported for power generation pursuant to the Circular may also remain unutilized in the event of any breakdown, he added.

“We reiterate that inability to import spare parts is directly attributable to restricted availability of foreign exchange in the country. Under Clause 10 of the Implementation Agreement (IA) of October 27, 2008 between Pakistan and Hub Power Company Limited, the Government of Pakistan (GoP) is required to ensure availability of foreign exchange required for the foreign currency expenses, inter alia, purchase of spares,” CFO Hubco continued.

In light of the agreed provisions of IA, Hubco has requested Managing Director PPIB for his immediate intervention to ensure availability of adequate foreign exchange and remove the hindrances in import of spare parts and other foreign currency payments. In this regard, it is cogent for the time being to amend the priority list in the Circular to include power plant parts in the description of energy imports.

Hubco has emphasized that any consequential losses due to non-availability of spare parts would be to GoP’s account.

“In the present circumstances, State Bank of Pakistan (defined as a Public Sector entity in the IA) has issued a circular (which falls within the definition of Laws of Pakistan) which does not specifically include spare parts in the priority list for foreign currency payments, pursuant to which banks are not allowing the Company to open LCs or make payments for import of spare parts. This is an event beyond company’s reasonable control and materially and adversely affects its obligations under the PPA.

“Accordingly, these circumstances fall within the terms of Pakistan Political Event under clause 13 of IA, and trigger an Exceptional Event. Similarly, they also constitute a Force Majeure under Article 15 of the PPA,” the letter contends.

The power company maintains that it reserves its rights under the various concession documents and all enabling provisions of law including but not limited to Power Purchase Agreement (PPA) and Implementation Agreement (IA) for all the consequential losses due to unavailability or restricted availability of foreign exchange.

Copyright Business Recorder, 2023

Comments

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Tulukan Mairandi Apr 18, 2023 10:13am
Just off the lights. Better to enter into default-era in darkness. Anyway there was no electricity in Mohenjo Daro too.
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Obaid Surmawala Apr 18, 2023 10:35pm
340 million in poverty under modi and UN rule in India Dont think we are fools.
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