IPPs give 72-hour ultimatum

The advisory council of independent power producers (IPPs) has issued an ultimatum of 72 hours to the government for the non-payment of Rs 34 billion, failing which the IPPs legal counsel will proceed with legal options. The ultimatum was issued after the failure of government to honor its sovereign commitment. Moreover, eight IPPs served another fresh notice for payment of Rs 9 billion to the government. Sources said the government must act positively to avoid any embarrassment in court of law, as the industry was facing a hard time with severe cash crunch, especially when banks had stopped further loans. However, in the larger national interest, the IPPs are continuing to run their plants on the basis of fuel payment they got from NTDC for a few hours. The sources revealed that despite this huge default, the IPPs were generating power per their commitment based on funds they were given for fuel, but the situation was getting worse day by day.
The IPPs would soon start to default on their loans, both short-term and project loans from the banks, which would cause another of Pakistani industry (banks) to collapse. The sources said since the deadline of the final 10-day notice of Rs 34 billion payment ended on May 4, 2012, which was served by the same eight IPPs on April 19, it had become evident that soon the IPPs would have all their investment jeopardized by the government’s indifference towards financial woes of these power producers. They said a case outside Pakistan against this sovereign default would immediately result in severe reactions by the global financial sectors. The banks, they added, would stop honouring trade documents from Pakistani banks and would insist on cash payments.