Four IPPs verging on invoking sovereign guarantee


The notice period of 30 days given by four IPPs before the invoking of sovereign guarantee has ended on June 13, 2011 and it is highly likely that these IPPs will invoke the sovereign guarantee today (June 14, 2011) after which the government is bound to clear the dues within 10 business days, sources said.

They said that the four major Independent Power Producers (IPPs) in the country, Nishat Chunian, Nishat Power, Liberty and Atlas Power, had issued a notification demanding sovereign guarantee from the government claiming that the government has long overlooked their problems and they had no other option left.

Sovereign guarantee is considered the last stage when a company seeks guarantee of satisfaction from the government in case of its bankruptcy. The total outstanding dues of these IPPs were more than Rs. 16.4 billion as on May 13, 2011 out of which Rs 10 billion are yet to be cleared.

Sources said that this has been the second instance in Pakistan when a company has issued a notice for sovereign guarantee. In 1998, Hub Power Company was apparently compelled to act along these lines forcing the government’s hand which took urgent measures to pay the dues of Hub Power Company within the timeframe avoiding invocation of sovereign guarantee.

However, in this case, the notice period of 30 days has already passed and the government does not seem to take it too seriously as the meeting between PEPCO and the four IPPs on June 13, 2011 ended inconclusively and more than Rs10 billion of these IPPs are yet to be paid by them, sources added. If the government fails to pay the dues to these IPPs then the financial stability of the country will become a question mark and it will face dire consequences in the international arena.