IPPs give ultimatum for immediate payment of Rs150b


Giving ultimatum to the government, the conglomerate of power sector investors, Independent Power Producers Advisory Council (IPPAC) on Monday demanded immediate payment of their outstanding dues of Rs150 billion otherwise the independent power producers (IPPs) may default leading to closure of generation during the next few days.
An emergency meeting of IPPAC was held under the chairmanship of Abdullah Yusuf, where serious concern was expressed by the members over the expanding dues payable to them by the Pakistan Electric Power Company (PEPCO). The meeting was told that IPP dues have increased to Rs210 billion on August 8, 2011. A statement issued by IPPAC said they would request the ministerial committee on power to immediately convene a meeting to apprise authorities of this alarming situation. The meeting resolved to reiterate to the committee, the urgency to immediately inject at least Rs150 billion to save IPPs from total closure within the next few days. Failure to do so would cause immediate shortage of electricity for consumers.
Gul Ahmed Energy in the South is also shut down for the last three weeks due to nonpayment of almost Rs3 billion by Karachi Electric Supply Company (KESC). This is causing defaults with their banks and also restricting the supply of power due to non availability of fuel. The position has aggrieved to the point, that within the next few days, they will be forced to shut down their power plants due to nonpayment of their overdue amounts outstanding. The members felt particularly concerned that the present position of load shedding would be aggravated and would unduly create more hardships for the public particularly during the Holy month of Ramadan. A source said it was initially proposed in the meeting that discussions should be held with the ministerial committee however some IPPs opposed the move saying that they needed immediate clearance of their outstanding dues as banks were after them to make payments of their outstanding installments. There was a general consensus that the only way to resolve the crisis was to ensure that the government pays for what its gets otherwise they could not continue power generation. If there is no payment, then there should be no supply.
An official source said that they were trying to ascertain if there were other players involved in pushing IPPs to take such an extreme step at a time when the government is under pressure from US on various issues. He said some of the IPPs were owned by banks and there was no issue of default. Timely payment of their outstanding dues and fuel supplies were being looked into by the government and IPPs were aware of the efforts to resolve the issue. He said IPPAC had proposed swap of IPP dues of Rs140 billion against similar installment amount dues to local banks to PEPCO’s balance sheet. The proposal if implemented would have cleared the dues of IPPs in one go but the government was undecided as PEPCO was to be dissolved and already the government was making huge interest payments on account of picked up circular debt. The electricity crisis in the country has been exacerbated with the Rental Power Plants operating at less than 50 per cent of their actual capacity since the government is finding it hard to make payments for fuel that is required to produce more electricity. The circular debt has further contributed to debilitate the economy with power distributors such as the KESC, Pepco, Hubco and state owned fuel suppliers like Pakistan State Oil (PSO) and partially state owned Pak Arab Refinery (PARCO) being ensnared in the ‘circular debt’ trap.