No attempt by govt to resolve issues with IPPs


The government has failed to contact the nine Independent Power Producers (IPPs) which were given it 30 days notice for clearing its outstanding dues of Rs31 billion. An official source told Profit that the government had received notices from nine IPPs through the Private Power and Infrastructure Board (PPIB).
He said that no contact with IPPs was made so far and the notices were under scrutiny. However, he said, verbal directions have been issued to the Pakistan Electric Power Company (PEPCO) to take effective measures against any unintended load shedding during the Eid holidays. Chairman of IPP Advisor Council Abdullah Yousaf also confirmed that the government had not contacted the IPPs after they issued notices invoking sovereign guarantee on August 26. He said that the IPPs were operating on day-to-day basis and non resolution of issue could lead to closure of generation any time.
The nine IPPs which have issued notices have cumulative generation capacity of 1,900 MW. They have outstanding dues of Rs31 billion. The country has more than 29 IPPs out of which 27 plan to invoke sovereign guarantees against the non payment of their dues which have crossed over Rs211 billion. The IPPs were in a difficult position as they have to repay the loans they took from banks and get further financing to carryout their daily expenses. IPPs had proposed that their Rs140 billion financial liabilities should be picked up by PEPCO so they could meet their daily requirements. The government had remained silent on the proposal. The source said that technically IPPs could stop their generation, as they had given notices citing financial constraints due to the non clearance of outstanding dues by the government. He said that any reduction by IPP could put the whole system at risk. PEPCO could not meet the country’s requirements through hydel resources as any release from the reservoirs above the daily indent would raise alarm bells in the lower riparian Sindh.
IPPs had earlier warned the government on August 8, 2011 that they were forced to close down due to their precariously financial conditions. The electricity provided by IPPs to PEPCO is billed at Rs56 billion per month while the payment is less than fifty per cent. On late payment PEPCO is liable to pay a penal interest charge of 4.5 per cent above KIBOR which was Rs26 billion for the last fiscal year. The government’s decision not to pass on the difference of Rs2 per kWh between the determined and applied tariff to consumers is resulting in a massive subsidy of Rs190 billion per annum. Due to various structural and governance issues of PEPCO another burden of Rs170 billion per annum is added up. Both these factors cause loss of Rs350 billion per annum to the national exchequer.