ISLAMABAD: The continuous buildup of energy sector circular debt has reportedly dismayed the Central Power Purchasing Agency-Guaranteed (CPPA-G) prompting it to contend that it does not have sufficient funds to pay 7th installment of mark-up on Rs 50 billion Syndicated Term Finance Facility (STFF) for Power Holding Private Limited (PHPL), well-informed sources in CPPA-G told Business Recorder.

According to Leader of the House in Senate, Senator Shibli Faraz, the stock of circular debt has reached a shocking level of Rs 1.9 trillion of which Rs 1.1 trillion is circular debt, as defined, and Rs 804 billion is parked in PHPL's accounts.

PHPL was incorporated in 2009 under the Companies Ordinance 1984 (Now Companies Act 2017) as wholly owned and controlled by Government of Pakistan. It is a Special Purpose Vehicle (SPV) with one function: to arrange bridge financing for repayment of liabilities of Discos and settle the circular debt of power sector on the terms and conditions approved by the Ministry of Finance with concurrence of ECC. PHPL has the function to park the loans taken for the power sector by performing swap financing arrangements and negotiating financing terms of the loans obtained.

PHPL executes the financing agreements with banks and disburses the entire proceeds through CPPA-G for settlement of Discos liabilities towards power producers. All the financing facilities are secured against unconditional and irrevocable guarantees of the government of Pakistan.

Power Division, sources said, wrote a letter to CPPA-G last month whereby the latter was advised to pay 7th installment of interest to PHPL on Rs 50 billion STFF in order to avail the rebate as the issue of budgeting of the payment was being taken up with the Ministry of Finance.

CPPA-G has cited the reference of the ECC decision which says "the servicing of the new proposed facility as well as the principal amount will be done through imposition of surcharge @ Rs 0.55kWh after approval of National Electric Power Regulatory Authority (Nepra). For the interim (six months) or tariff determination, whichever is earlier, the mark-up servicing will require GoP support which will be treated as GoP equity in Discos."-MUSHTAQ GHUMMAN