Four IPPs withdraw final notices on payment of Rs. 5 billion

Posted on June 22, 2011. Filed under: Energy crisis, Finance, IPPs, Pakistan, PEPCO |

ISLAMABAD, June 21: Four independent power producers (IPPs) decided on Tuesday to withdraw their final notices seeking encashment of sovereign guarantees after they were paid Rs5 billion and assured that the remaining dues will be cleared before June 30.

An agreement to that effect was reached after negotiations between Water and Power Minister Syed Naveed Qamar and a delegation of IPPs, led by Mian Mohammad Mansha and Yousaf H. Shirazi.

The IPPs — Nishat Power and Nishat Chunian of Mian Mansha, Atlas Power of Yousaf Shirazi and Liberty Tech — with a combined capacity of 880MW had issued the final notice on June 15 to call sovereign guarantees and stop production because of non-payment of dues against electricity they had supplied to Pakistan Electric Power Company (Pepco).

According to sources, the IPPs initially took a strong position not to withdraw the notices till the clearance of full payment, but agreed to oblige on upfront payment of Rs5 billion and commitment for the release of Rs3.25 billion before June 30.

The IPPs were told that their claim of about Rs10 billion also involved about Rs2 billion still-tobecome-overdue bills under contractual obligations.

The sources said the crisis had been averted after Prime Minister Yousuf Raza Gilani approved last week a power ministry’s summary seeking payment of Rs11 billion for the IPPs. The remaining amount of Rs2.75 billion will be paid to some other distressed IPPs.

An official was of the opinion that the notices had automatically become ‘infructuous’ after the partial payment of dues. But an IPP representative said that was not the case, adding that the IPPs would have to write formal letters to banks informing them about their decision not to go ahead with encashment. Otherwise, he added, the banks were bound under the law to pay the quoted amount on behalf of the government on June 23. He said withdrawal letters would reach the banks on Wednesday.

On Saturday, the power ministry wrote a letter to the prime minister and requested him to personally intervene for releasing Rs11 billion urgently to contain the crisis and avoid international embarrassment. Till May 15, the government owed about Rs122 billion to all IPPs.

Under its sovereign commitment, the government is bound to make payments to IPPs if their power purchaser, Pepco/Wapda, fails to clear dues. The failure to make payments by the government after a 30-day notice is technically considered as ‘sovereign default’ which leads to negative ramifications for the country’s credit ratings and interest costs.

The IPPs served the first 30-day notice on the government on May 13 to start the process of calling sovereign guarantee for recovering their combined power dues of Rs16.5 billion. In response to the notice, the NTDC/Pepco released about Rs6 billion, but delayed payment of the remaining amount because of financial problems.

Despite an estimated payment of about Rs296 billion in subsidy to Wapda/Pepco during the current financial year against a budgetary allocation of Rs84 billion, the entire power sector, including private companies, was facing serious financial problems because of continuous increase in outstanding dues, resulting in lower than required fuel purchases and compounding electricity shortfall.

The government has picked up more than Rs300 billion arrears from power companies’ balance sheets and parked the amount into a newly-created Power Holding Company and raised almost an equivalent amount from banks to improve the power sector’s cash flows.

The government paid Rs40 billion alone as interest against these loans out of the federal budget and the amount is expected to reach Rs56 billion during the next financial year.

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Power theft reporting – PEPCO…

Posted on June 16, 2011. Filed under: DISCOs, Energy crisis, PEPCO, Wapda / KESC |

Steeling of Power is crime against every Pakistani and who ever does it, is our enemy. Please help PEPCO in its effort to stop power theft by reporting at its toll free number 0800-84338. This is a free number for all calls including NTC, PTCL, Mobiles or wireless phones.

Intstructions for theft reporting:

Call the Toll free number 0800-84338

Listen the instructions carefully

After pressing 1, Record your message about event of theft

Please give maximum detail of location

After completing the message disconnect the call

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