ISLAMABAD, June 30: The government has decided in principle to issue a total of Rs8 billion Wapda bonds to finance Mangla Dam raising project and convert Rs21 billion worth of Wapda loans into federal government’s equity.

The Economic Coordination Committee (ECC) of the cabinet which meets here on Friday with Prime Minister Shaukat Aziz in the chair would formally approve these decisions and allow a payment of $98 million as compensation to Ghazi Barotha Contractors led by Impregelio of Italy.

Official documents seen by Dawn suggest that the ECC would approve floatation of a Rs5 billion Wapda bonds with a green shoe option of another Rs3 billion in case of oversubscription, making the total size of Wapda bonds for Mangla dam raising project to Rs8 billion.

The National Economic Council (NEC) has already approved the issue of Wapda bonds for Mangla dam to meet its financing gap of Rs8 billion. These bonds would be backed by federal government’s sovereign guarantees and would be offered to the commercial banks.

Similarly, Wapda was facing difficulties in financing federal government’s interest and principal loan repayments for the last fiscal year owing to its cash flow constraints.

After detailed discussions, the federal government has decided to convert these loans as government’s equity to relieve Wapda of cash problems.

The ECC would also approve payment of $98 million to Ghazi Barotha Hydropower Project contractors as compensation for a force majeure arising out of 9/11 and US attacks on Afghanistan.

The contractors had given up the project implementation and claimed $450 million in compensation in addition to $76 million compensation already received by the company about three years ago.

The former Wapda chairman Lt. Gen. Zulfikar Ali Khan had refused to pay more than $76 million to the contractors in compensation. The contractors had approached international court of arbitration for $450 million compensation.

A three-member committee comprising attorney general of Pakistan, chairman Securities and Exchange Commission of Pakistan and incumbent chairman Wapda held negotiations with the contractors and reached an agreement to pay them $98 million compensation.

This compensation would be other than $511 million to be paid to the contractors as construction cost, etc., and $250 million in process of payment to the engineers of Ghazi Barotha project. The ECC would formally approve this agreement between the GBHP contractors and the Wapda. The ECC is also expected to lease out two concrete factories of Pakistan Railways to the private sector and review implementation of wheat procurement policy.

The ECC would also increase intervention price for basmati and irri-6 paddy crop by Rs50 per 40 kg to Rs560 and Rs260 respectively for the upcoming paddy crop. The ECC would also approve import of 250,000 tons of urea fertilizer and transfer of about 1200 acres of Pakistan Steel Downstream Industrial Estate to National Industrial Parks Development and Management Company.