ISLAMABAD: The government on Friday completed Rs89.2 billion transactions as the first instalment of payments to 20 independent power producers (IPPSs) from the Rs403bn committed under a settlement agreement with 46 IPPs signed in February.

Payment to other IPPs suffered delay as the National Accountability Bureau (NAB) had decided to examine the deal.

“The government has completed the first payment transaction of 40pc to 20 IPPs amounting to Rs89.2bn equally divided in cash, five years’ Sukuk and 10 years’ Pakistan Investment Bonds (PIBs),” the Ministry of Finance said, adding the transaction was coordinated by the State Bank of Pakistan, power division and its various organisations.

Of the 20 IPPs, six had been set up under the 1994 power policy, two before the 1994 policy and 12 renewable energy (RE) projects based on wind, solar and bagasse energy. Total payables to the 20 IPPs under the February 28 agreement stood at Rs225bn. Of this amount, Rs89.2bn has been cleared as the first (40pc) installment.The remaining 60pc will be paid within six months in a similar manner.

Banks involved in the transaction included Habib Bank Limited, MCB Bank Ltd, Allied Bank, Faysal Bank, Bank Al-Habib Ltd, Meezan Bank, Bank of Punjab, National Bank of Pakistan, Bank Alfalah Limited and Bank-Islami Pakistan.

Details showed Hubco was paid Rs23.2bn including Rs7.7bn each in cash, PIB and Sukuk. Likewise, Rs39.6bn was paid to Kot Addu Power Company at the rate of Rs13.2bn each as cash, PIB and Sukuk. The major chunk of Rs62bn went to these companies, which had been set up before the 1994 power policy.

Another Rs22.8bn was paid to six IPPs of 1994 policy including Rousch, Fauji, Pakgen, Lalpir, KEL and Saba power.

All these payments, which had to be cleared by March 29 under the agreement, were delayed due to the involvement of the National Accountability Bureau (NAB) in the process, making the government default technically.

Renewable energy plants

The renewable energy plants were paid a total of Rs4bn including FFC wind, Act wind, Artistic wind, Harappa solar, AJ Solar, Rahimyar Khan mill (sugar), JDW I & II sugar, Hamza sugar, Thar sugar and Al Moiz.

Under the payment mechanism agreed with the IPPs, the amount was to be paid in two installments. The 40 per cent of the said payables was to be completed latest by the end of March – one-third in cash, one-third in five-year Sukuk and one-third in 10-year PIBs at floating rate of T-bills plus 70 basis points.

The remaining 60pc will be paid within six months in a similar manner. The payment schedule derailed after the NAB had decided to examine the deal.

The formal default was, however, avoided under a safety clause that said “in the event of any default by the power purchaser under this amendment, the company shall suspend giving tariff discount from the date of default; provided, however, if such default is not cured within a period of seventy (70) days, the company shall have the right to terminate this amendment by seven (7) days’ notice, with no rights and obligations of either party arising out of the termination of this amendment. termination of this amendment shall not affect the accrued rights of the parties”.

Published in Dawn, June 5th, 2021