It’s the final countdown


While the power shortages in the country have intensified after the shortfall climbed to over 6000 megawatts, the representatives of at least eight Independent Power Producers (IPPs) on Thursday have submitted their final 10-day notice to the government seeking the clearance of their outstanding dues of Rs 34 billion. According to sources, the notice of sovereign guarantee is to end on May 2, 2012, after which they will shut down their plants as they will be not in position to buy more fuel to run the plants. Earlier, these 8 IPPS served the initial notice to the government for their payments of Rs 34b which PEPCO had failed to pay within the prescribed time. Sources in the advisory council of these 8 IPPs informed that they will also serve the final notice of other dues of Rs 9 billion to the government,for which they have already served the initial notice on April 2. Moreover, sources informed, on 12 May 2012 the IPPs will also serve a final notice for the payment of Rs 4 billion. “So, one can guess how difficult it has become for IPPs to run their operations smoothly,” sources added. Ironically, the government instead of clearing such outstanding dues kept asking the IPPs to withdraw their notices. Despite a number of meetings between the representatives of IPPs and Ministry of Water and Power along with Finance Division before submitting the final notice, the government is still nonchalant towards the financial woes of the IPPs, which are producing around 1650MWs to help the government curb energy crisis. Since the government has constantly been ignoring the implications of possible sovereign default by not responding to the notices of IPPs, it is no wonder that the country’s energy crisis will deepen further once they shut down their units. It may be noted here that last year on May 13 total 4 IPPs served notices to the government on the non-payment of Rs 16.43 billion. And now this year, both the number of IPPs and due payment got doubled owing to the indifference of the government towards country’s energy issues. Pepco is the power purchaser that has failed to clear its dues within the agreed period for power supplied to it by IPPs. As the government of Pakistan was the sovereign guarantor, the IPPs after exhausting all legal avenues including serving notices to Pepco, invoked the guarantee. The non compliance on these notices, it must be noted, would be the first step towards sovereign default on the part of the government. This will also create ample hurdles for the government to invite new IPPs in the country in near future. Besides, the country’s rating would nose down and no foreign bank would entertain Pakistan’s letter of credits, which will take hefty toll on the country’s exports. In total, the government has to pay Rs 113 billion to 18 IPPs that include Hubco, Kapco, Attock Gem, Liberty Power, UCH, Nishat Power, Atlas Power, Nishat Chunian, Liber Power Tech, AES Pakgen, Rousch, AES Lalpir, Saif Power, Saphire Power, Fauji Kabir, Orient, KEL, and Halmore.