KARACHI - Nine Independent Power Producers (IPPs) have served 30-day notice to Pakistan government for the release of overdue amount of Rs31.16 billion on 25th August and on September 10 another notice was served by same 8 IPPs for Rs14.79 which became overdue on 1st September 2011, swelling their dues to Rs45.95 billion.
If payments are not made within 30 days, the IPPs will have no choice but to call the sovereign guarantee. On 10 September, the IPPs served another notice to the Federal Government after as usual failing to hear any good news from Pepco.
The inefficiency of Pepco, a source in IPPs said, could be gauged from the fact that it not only fails to clear the dues but instead of striving for it penalised the IPPs, further aggravating crisis.
The nine companies are paying the price for threatening to call the sovereign guarantee of government of Pakistan as even the normal small payments that are being regularly made to all other IPPs are being denied specifically to them once they served the notices. The notices were in accordance with the agreements they signed with Pepco and GoP (under the sovereign guarantee).
Few months back four out of these IPPs had even invoked the guarantee after a cold shoulder from Pepco and then the government but invoking of guarantee made the government realise the situation of default it faced and it arranged payments for these IPPs. It was made clear to both government and Pepco that dues clearance has to be a regular affair as the IPPs under 2002 policy have to buy their own fuel for which they need continuous cash supply, which is assured in the contract between Pepco and them and guaranteed under Implementation Agreement by GoP.
The director of one of the IPPs said that it is unfortunate that while being our sole client Pepco defaults on payments and subsequently the government guarantee has to be called which put government also in awkward position internationally. Surprisingly this time around it seems that elements with vested interests have made things worse by advising Pepco to stop daily payments which will eventually result in closure of these plants.
Now power supplier in the power sector has cash requirement to the tune of Rs4-6 billion to run their plants, said a representative of one of the affected companies. The government, he added, has to fulfil its commitment of timely payments to IPPs to ensure uninterrupted power supply from private sector producers, he said.
Another affected IPP Director said that up till now the affected IPPs were arranging funds from the banks to buy fuel for running their generators. The banks have now flatly refused to provide further funds as the limits and collateral provided by the IPPS have exhausted, he said.
He said that the banks are justified as they cannot take undue risks when the government is constantly in habit of defaulting on payments to the IPPS. Never in last three years the IPPs dues have been fully cleared. In fact the amounts due went on mounting forcing the IPPs to take the extreme step. The government must realise that we are paying a fortune to the banks on the credit that we are forced to take as our legally due payments of power supplied are not released by Pepco.
The details of the dues of the nine IPPs available in Pepco record show that Rs7.178 billion to Atlas Power Company that include previous noticed overdue amount of Rs4.569 billion on August 25 and Rs2.579 billion power supplied in subsequent month. Pepco owes Attock Gen Limited Rs9.61 billion (Rs7.76 billion plus Rs1.84 billion). Liberty Power Limited dues were Rs4.186 billion on August 25 plus Rs2.555 billion additional bills after that.
Overall dues of Nishat Chunian Power Limited have exceeded Rs6.6 billion, Orient Power Limited has to recover over Rs3.8 billion, Pepco owes Nishat Power Limited about Rs6 billion, Sapphire Electric Company Limited dues were Rs1.48 billion on August 25 and has not supplied any power after that. Halmore Power Limited has to collect over Rs1.2 billion from Pepco while the total dues of Saif Power Limited exceed Rs3 billion.