KARACHI: SSGC may stop supply to KESC: Non-payment of dues
By Bahzad Alam Khan
KARACHI, Dec 28: The Karachi Electric Supply Corporation is likely to lose the gas supply it receives from the Sui Southern Gas Company because the power utility has not paid its bill for the past two months, Dawn learnt here on Friday.
Sources in the KESC said the power utility had not paid the dues of October and November which amounted to over Rs1.3 billion.
SSGC sources said that the outstanding dues were too large to be ignored. Last year, they said, the KESC had purchased natural gas worth Rs5 billion from the SSGC. Similarly, the year before last the KESC had paid Rs2.59 billion for the gas it had received from the SSGC.
KESC officials said the SSGC claimed 13 per cent of the outstanding dues as late payment surcharge but the power utility never paid it.
The sources said there was no written agreement between the KESC and the SSGC for the supply of gas from its gas fields. “Being two government organizations, both utilities try to cooperate with each other.”
Sources at the SSGC said the army, which had taken over the management of the KESC in May 1999, had failed to make the power utility become prompt in paying up outstanding dues to the gas company.
When contacted, the KESC principal information officer was not available for comment.
Analysts say that whereas, on the one hand, the government is converting the Government of Pakistan subordinated loan into equity — the process which is also referred to as debt-equity swap in technical parlance — the KESC is accumulating debt in the form of outstanding dues from the SSGC.
The KESC officials told Dawn that in the annual general meeting of the power utility, scheduled to be held on Dec 29, the board of directors, as a “special business”, would ask the shareholders to approve the conversion of Government of Pakistan (GoP) subordinated loan and KESC debt servicing liabilities amounting to Rs17.84 billion into equity.
They added that this debt-equity swap had been approved by the Economic Coordination Committee on Oct 17, 2000. It had also been okayed by the finance division vide its letter No 5(16)CF.1/97-98-VOL-24-1358 on Aug 10.
The KESC officials said that debt-equity swap was aimed at restructuring the balance sheet of the power utility — a move also believed to be recommended by the financial advisers of the KESC, Price Waterhouse Coopers.
The Asian Development Bank and the privatization commission jointly engaged Price Waterhouse Coopers to prepare a report on the sell-off of the power utility.
The KESC officials told Dawn that the conversion of the GoP subordinated loan would also enable the ADB to give a hard yet sympathetic look for the disbursement of the promised loan, equivalent to Rs15 billion.
KESC officials at the Bin Qasim power plant told Dawn that the power utility had converted five generation units to natural gas because the other alternative, furnace oil, was far more expensive than natural gas. They added that if the gas supply from the SSGC was suspended, or even decreased, the cost of production would go up enormously.
Analysts point out that in 2000 the KESC consumed fuel and oil worth Rs13.9 billion. In 2001, the KESC used fuel and oil worth Rs17.7 billion.
