Six IPPs serve notices on CPPA-G
MUSHTAQ GHUMMAN
ISLAMABAD: As the circular debt has touched Rs 656 billion, six Independent Power Producers (IPPs) have served notices of non-payment to Central Power Purchasing Agency Guaranteed (CPPA-G), well-informed sources in PPIB told Business Recorder.
“We have received copies of notices of non-payment sent to Central Power Purchasing Agency Guaranteed (CPPA-G) under respective Power Purchase Agreements (PPAs) namely M/s Atlas Power Limited, Hubco- Narowal Project, Liberty Power Tech Ltd, Nishat Chunian Power Ltd, Orient Power Company, and Saif Power Limited,” the sources added
According to sources, through these notices, it has been revealed that the power purchaser failed to make payments to these IPPs as required under the governing PPAs.
“PPIB has been served with copies of these notices pursuant to section 16.9 of governing PPAs, while GoP (being the guarantor) has been notified through PPIB, pursuant to section 1.5.1 of respective GoP guarantees. However, the payment defaults need to be cured within the available periods prescribed under the respective PPAs,” the sources said, adding that the Board has requested the Ministry of Energy (Power Division) to intervene in the matter and exercise all endeavors for the earliest release of undisputed outstanding payable amounts to the IPPs.
The outstanding balances of the Power Generators (public and private) were Rs 514 billion on December 31, 2017 and estimated to be over Rs 575 billion on June 1, 2018. This number is growing @ of approximately Rs 15-18 billion per month. The verified and audited overdue amounts of 22 IPPA members (total 5910 MW) on June 30, 2018 have crossed Rs 232 billion. Other than the current amounts outstanding loans of approximately Rs 533 billion are parked in PHPL (Power Holding Private Limited), making the total amount of circular debt over Rs 1 trillion.
The overall combined collection ratio (netting off losses, theft and non-recovery) is approximately 70%. Each percent of leakage translates to approximately Rs 11 billion per year. This situation is unsustainable without major and fundamental reform in distribution.
“While we understand that such reform is not the mandate of the interim Government, some plants are likely to shut down due to lack of funds within a month, if this situation is not rectified urgently. Generators need to be paid enough to allow for time for the new government to implement much needed reforms,” said the IPPs in a letter.
The final award of Rs 14 billion in International arbitration for unduly withheld amounts by NTDC in 2011-2013 was issued in favor of 9 IPPs in 2017. Interest on this is accruing at Rs 120 million/month and has already reached almost Rs 2 billion, making the total due Rs 16 billion.
The IPPs argue that build up of massive circular debt and non-payment of international arbitration awards is significantly damaging local and foreign investors’ confidence. This is especially dangerous at a time when massive additional investment is needed in distribution sector. The IPPs have appealed to the Prime Minister to resolve these issues urgently. IPPs are an important part of the national economy and cannot function efficiently if key issues remain unresolved for years.
