LAHORE, April 21: Two independent power producers with 250MW capacity near Lahore have been lying idle for the last five months due to a controversy over the mode of payment with the Pakistan Electric Power Company (Pepco).

The managements of the Southern Power and the Japan Power (of 125MW capacity each) want, as per past practice, advance payment whereas the Pepco says it cannot spare money because of liquidity crunch.

The two IPPs started getting advance payment two years ago when they could not sustain their operations and approached the then Wapda chairman, Tariq Hamid, with a financial bailout request. The Wapda agreed to 55-day advance payment to both the units at an interest rate of KIBOR plus 1.5 per cent, thus acting as a bank.

With new management taking over and financial crunch deepening, the Pepco stopped the advance payments some five months ago. Both the Pepco and the IPPs went into litigation accusing each other of violation of different clauses of the power purchase agreement (PPA).

Talking to Dawn, Pepco spokesman Iqbal Ghauri said the company was facing an acute financial crunch and could not spare a huge sum of around Rs3 billion for these units. He said Wapda had agreed to pay advance money when it did not have cash flow problem.

At present, he said, the Karachi Electric Supply Company alone owed Pepco Rs39 billion. Other IPPs and Pakistan State Oil had put the company on a notice for a staggering Rs35 billion. “It is very hard for the company to spare $50 million for these two units,” he said.

The IPPs have, however, a different view. “In fact, a very influential investor, who has recently taken over many projects on political grounds, has lately shown interest in purchasing these units,” says an official of Southern Power.

He said the Pepco management knew that both these IPPs would fall flat without its help.

The Pepco can take over any IPP if it does not run for 18 consecutive days. To avoid this bar, both these plants remain close for 17 days and operate for an hour on the 18th day. —Ahmad Fraz Khan