ZAHEER ABBASI

ISLAMABAD: The Finance Ministry has provided a fresh guarantee of Rs 30 billion to the power sector for settlement of its liabilities on account of repayment of loan and interest payment through a fresh loan.

Sources in the Finance Ministry said that the Ministry of Water and Power presented a proposal to the last Economic Coordination Committee (ECC) of the Cabinet meeting that a syndicated term finance facility for Rs 30.95 billion was executed between Power Holding (Private) Limited and consortium of local commercial banks collectively for the purpose of funding the repayment liabilities of the Discos in pursuance of the ECC decision in 2014.

The period of the facility was five years, inclusive of grace period of 24 months from the first disbursement date with a grace period applicable to principal repayments only.

The Water and Power Ministry added that it imposed debt service surcharge on the consumers of the electricity for the purposes of payments on account of mark-up, to the syndicate as and when due, in respect of the PHPL financing facilities including Rs 30.95 billion syndicated term finance facility. As a result of limited available fiscal space and liquidity, power sector does not have capacity to pay principal installments. Ministry of Water and Power and the Ministry of Finance are working on a settlement plan for the PHPL financing facilities.

The grace period of 24 months of Rs 30.95 billion syndicated term finance facility has completed and payment of semi-annual installments on account of principal portion amounting to Rs 5.158 billion has become payable semi-annually.

The distribution companies/power sector will have to arrange funds through borrowings from local commercial banks in order to discharge their liability towards syndicate on account of principal installments in respect of Rs 30.95 billion syndicated term finance facility.

The proposed loan will be arranged on behalf of power distribution companies by Power Holding (Pvt) Limited through syndicated term finance facility and this will be cash neutral transaction. The consortium of local banks comprising Meezan Bank Limited, Allied Bank Limited and Bank of Khyber has agreed to provide the fresh financing facility of Rs 30.95 billon and in this regard draft term sheet is received from the syndicate.

Power Holding (Private) Limited is a public sector entity without assets and will be responsible for arranging loan for power sector companies for the purposes of adjusting the existing facility of Rs 30.95 billion executed in pursuance of the ECC decision.

The Ministry of Finance was requested to provide government guarantee for repayment of loan as well as interest, for the fresh facility amounting to Rs 30.95 billion.

The servicing of mark-up, principal repayments and all other amounts becoming due and payable in respect of the fresh facility shall be the responsibility of Ministry of Water and Power. Pursuant to the arrangement, Power Holding (Private) Limited shall be entitled to additional rebate of 0.30 percent per annum (Rs92,850,000 per annum) on payments on account of mark-up within 30 days of the due date.

The principal installment payments shall also be deferred for further period of two years from the date of execution of fresh facility.