The Engro Powergen Thar Private Limited (EPTL) in Pakistan has warned Islamabad that it would close the plant if its financial issues are not addressed, reported Business Recorder.
The company has written Central Power Purchasing Agency-Guaranteed (CPPA-G) a number of letters, most notably one on February 22, 2023, in which it asked for payment of its unpaid debts and alerted CPPA-G of impending debt servicing needs totalling Rs 28 billion.
According to the power company, as of March 20, 2023, it had only received Rs 4.125 billion and still needed another Rs 24 billion to ensure successful debt servicing by end of May 2023.
In a letter to CFO CPPA-G, the Company’s Chief Financial Officer (CFO), Wang Pu, made it clear that the amount needed for debt servicing is in addition to the regular monthly payments of Rs 7 billion that is needed for the power plant’s ongoing and sustainable operations, including fuel, O&M, and insurance.
The power company’s outstanding receivables from CPPA-G have reportedly risen to an alarmingly critical level of about Rs 63.5 billion, with about Rs 55 billion past due. According to CFO EPTL, this significant overdue amount has caused a severe liquidity crunch for the company, as it is now facing significant liabilities to settle and payments to lenders and suppliers are becoming due.
Pu wrote in his letter, “This situation poses a severe threat to our operations and, if left unaddressed could potentially force us to shut down.” He also asserted that EPTL is one of the Economic Merit Orders (EMO) most affordable power plants.
By lowering the overall basket price of power and producing monthly savings in foreign exchange of between USD 50 and USD 60 million, the electricity generated from Thar Coal is a vital source of relief for the national exchequer, reported Business Recorder.
In his letter, the CFO asked for immediate payments to lower EPTL’s outstanding debts and guarantee the plant’s ongoing functioning and the benefits it offers the country’s economy.
The government has not yet developed a mechanism to address Chinese IPPs’ financial problems, which is the primary reason M/s Sinosure has refused to insure loans for new projects in Pakistan, according to an insider in the government who deals with Chinese IPPs, reported Business Recorder.
The Chinese embassy has also brought up the issue of Chinese IPPs at the highest level.
The government recently asked the National Electric Power Regulatory Authority (NEPRA), the body that oversees electricity, for permission to impose a surcharge of Rs 3.23 per unit starting in November 2023 for an indefinite period in order to pay the interest on loans to Power Holding Limited (PHL) and power generators. The Authority is anticipated to make its decision in about a week.
The matter of Pakistan Energy Revolving Accounts (PERA) intended for Chinese IPPs remains unresolved.
According to the Finance Division, in accordance with the ECC’s decision of October 31, 2022, it has given Power Division/CPPA-G permission to withdraw 56 instalments from PERA for the month of March 2023 totalling Rs 4 billion for subsequent exclusive payment to CPEC-IPPs after completion of all codal, financial, procedural, and legal formalities in accordance with established rules and regulations.
The Finance Division’s ex-post facto approval and concurrence for the time period of November 2022 to January 2023 will be processed once the necessary information regarding payables to CPEC-IPPs is received in the designated format and has been properly verified and signed by the Power Division and CPPA-G. The information is needed to determine the CPPA-undisputed G’s due amount and remittance beginning in November 2022, Business Recorder reported.
