ISLAMABAD: Karot Power Company Limited (KPCL) has approached National Electric Power Regulatory Authority (Nepra) to get approved its indexation for Q1 and Q2 of 2024 as the company has not been able to issue invoices amounting to Rs 20 billion, and its fifth debt payment amounting to $100 million will be due in October 2024.
The Power Company’s CEO, Liu Yonggang, in a letter to Chairman Nepra, Waseem Mukhtar explained that the Company had achieved Commercial Operations Date (COD) on June 29, 2029, after which, in accordance with tariff determination, it submitted request for “One time Adjustment of Tariff at COD” through True Up petition, on September 30, 2022.
According to the CEO, KPCL has already submitted about 90% of the project cost along with the supporting documents in its tariff petition and only 10% project cost is payable in lieu of Retention Money of EPC contractor and Taking Over Certificates (TOC) milestones; and as per EPC contract these payables cannot be settled until and unless the defect liability period is completed or if any works remain to be executed under defect liability or tests after completion, the employer (KPCL) shall be entitled to withhold the estimated cost of this work until it has been executed, and this is the only remedy available to the KPCL against Contractor.
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He further wrote that Karot Hydropower plant will be transferred to government of Pakistan after completion of concession period of 35 years and, to ensure sustainability of the plant and optimisation of economic benefits from the plant, it is important that plant should be technically free of defects.
Therefore, KPCL will submit the supplemental information/ addendum to the tariff petition upon the finalization/ settlement of costs payable in due course of time along with the auditor’s report.
The Company also appreciated Nepra’s provision of interim relief and indexation since the COD, saying that these measures enabled it to successfully manage four debt repayments totalling $ 271.65 million, alongside operational costs and other project-related expenses for 2023 and 2024.
He further stated that KPCL has not utilised any funds from CPPAG for non-operational purposes. No dividends have been remitted or declared to shareholders, nor have funds been transferred to any associate company since the COD.
“We have not even been able to maintain the necessary reserve funds required under the financing arrangements in favour of lenders due to shortage of funds,” said Yonggang.
The Power Company, in its letter further stated that due to pending indexations for Q1 and Q2 of 2024, KPCL has not been able to issue invoices amounting to Rs20 billion and its fifth debt payment amounting to USD 100 million will be due in October 2024. In addition, the Company must make necessary operational payments and project insurances.
Therefore, approval of quarterly indexations is also critical for the smooth operations of the power plant.
After sharing the history of the projects and issues, CEO requested Nepra to approve its indexations for Q1 and Q2 to enable it to settle critical project liabilities.
Copyright Business Recorder, 2024
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