Payment of Rs10bn dues IPPs plan to invoke sovereign guarantees

Posted on June 14, 2011. Filed under: IPPs |

LAHORE, June 13: Four Independent Power Producers (IPPs) will on Tuesday (today) serve the final notice on the government for invoking sovereign guarantee for the recovery of outstanding power dues of over Rs10 billion.“We have decided to give the final notice for invoking sovereign guarantees in next 10 days,” a director of one of the IPPs told Dawn on Monday.

Requesting anonymity, he said nothing short of full payment of the dues could change their mind.

The IPPs, which gave the preliminary notice for invoking sovereign guarantees for the recovery of Rs16.50 billion on May 14, include Nishat Chunian, Nishat Power, Liberty and Atlas Power having a combined capacity of producing 800MW of electricity.

The director said the government had released Rs6 billion to the four IPPs ever since they had served the preliminary notice, but was delaying the payment of the remaining dues.

Industry sources told this reporter that the Pepco authorities had held a meeting with the management of these IPPs and explained to them the reasons for the delay in the payment of their power dues.

But the meeting failed to produce any result as the IPPs remained unconvinced. The Pepco officials were told that the delays in the payment of the power dues had created financial crunch for the IPPs that were facing difficulty in procuring fuel for running their plants, they said.

“We have exhausted our credit lines (to purchase fuel) and run the risk of closure,” the CEO) of another IPP, who also requested anonymity, said, “The government has long been ignoring our financial problems and its contractual obligations and has forced us to demand the sovereign guarantee to stay afloat.” According to the power industry sources, some IPPs are in a position to wait for actual payment because they are assured of fuel supply by the PSO or gas utilities on the instructions of the government. But others, established under the power policy of 2002, do not enjoy this facility.

The sources claim that the IPPs established in the 1990s receive monthly capacity charges in addition to uninterrupted fuel supplies.

The IPPs established under the power policy of 2002 are neither given any capacity charges nor get uninterrupted fuel supplies. They are required to purchase fuel from their own resources and pay one month in advance.

“In case the government does not honour its contractual obligations, it will be deemed to have defaulted on its sovereign guarantees leading to downward revision of its sovereign ratings,” the director said.

He said the cases of resolution of disputes and encashment of guarantees would be heard in foreign countries like United Kingdom or United States because almost all IPPs had component of foreign investments.


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