Privatisation proceeds: government likely to pay billions to IPPs

The government is likely to pay billions of rupees to the protesting Independent Power Producers (IPPs) from the privatisation proceeds, well informed sources told Business Recorder. This decision has been taken at a recent meeting on energy sector presided over by Prime Minister Nawaz Sharif after the IPPs invoked sovereign guarantees.
Recently, 25 IPPs have claimed that an audited overdue amount of almost Rs 270 billion which is payable to them by the government, seven IPPs have formally notified the Government of Pakistan (GoP) on November 26, 2014 that they are invoking sovereign guarantees due to continuing default in payments by NTDC/WAPDA on account of power purchased from the IPPs, amounting to Rs 26 billion. Moreover, another three IPPs have served similar notices for calling the GoP sovereign guarantee on 1st and 2nd December 2014 in respect of an amount of Rs 14 billion. This amount if not cleared by 16 December 2014 will result in a total sovereign default of Rs 40 billion.
Talking to Business Recorder a representatives of the IPPs said that private producers are not even being paid bank's instalments and fuel.
"This is injustice. We have established power plants for profit but unfortunately we are not even being paid for fuel and banks' instalment," he added.
He was of the view that international financial institutions have adopted double standards in Pakistan on sovereign default. In other countries, the IMF and World Bank stop loans in such circumstances.
In reply to a question, he said that this step by the IPPs has been taken very reluctantly and after all other remedies have failed.
For several months, the IPPs have been requesting the government and power purchaser to clear the outstanding dues so that IPPs could in turn clear their outstanding liabilities to banks/ fuel suppliers and third parties for uninterrupted supply of power.
However, the lack of an adequate response from the government has resulted in a serious liquidity crisis for the IPPs, leaving them with no other option but to call the sovereign guarantee, which will be followed by shutting down the power plants.
Answering another question, he said that the IPPs established under 2002 are most efficient power plants in the world.
It is pertinent to mention here that the present government cleared 480 billion rupees of the IPPs last year but the amount of circular debt piled up once again due to irregular payments.