ECC extends another sovereign guarantee to Nandipur power plant

Amount of Rs30.6b available till May 2017; govt also approves buying 600MW electricity from captive power plants

ISLAMABAD: The federal government extended sovereign guarantees of Rs30.6 billion to the Nandipur power plant after the company was unable to retire its entire debt. It also decided to buy 600 megawatts (MW) electricity from captive power plants to bridge a shortfall in the coming summers.

The Economic Coordination Committee (ECC) of the Cabinet approved issuance of the second revised sovereign guarantees worth Rs30.6 billion for the 425MW Nandipur power project until 31st May 2017, according to a handout issued by the Finance Ministry. The ECC also approved to set up a price negotiation committee to import liquefied natural gas (LNG) from different countries.



The ECC’s decision to issue the guarantees for nine more months suggests that the company could not retire the debt it obtained from a syndicate of banks to install the power plant on the back of government guarantees.

In October last year, the ECC had approved the issuance of revised sovereign guarantees worth Rs37.7 billion for the controversial project for one year.

The guarantees have to be issued to a syndicate of local banks - HBL, NBP, UBL, Askari Bank, Bank Alfalah and the Bank of Punjab - to finance the project. The PML-N government secured these loans when it revived the project after coming to power in June 2013. The Nandipur company could only retire a loan of Rs7.1 billion in the past one year.

The second revision of guarantees would enable the syndicate to extend the financing facility till May 2017.

To bridge shortfall

The ECC also approved a proposal by the Ministry of Water and Power for utilisation of power generated through captive power plants, as a short-term measure, in order to optimise use of available generation in the coming summers of 2017 and 2018, said the Finance Ministry. It said the measure has been taken to add around 300 to 600MW of electricity to the national grid.



The captive power plants having capacity of 3MW or above on gas, furnace oil, coal, bagasse and other fuels/sources will be offered energy purchase under this policy. It said that the electricity tariff will be based on take-and-pay basis and electricity actually delivered to the national grid. The government will not pay idle capacity payments to these plants.

The decision indicates that the planned power plants may not become operational at the given dates, as these short-term measures were not part of the government’s original plan to end load-shedding by March 2018.

LNG supply

The ECC also approved to set up a Price Negotiation Committee (PNC) for LNG supplies from Malaysia, Russia, France, Italy, Oman and Azerbaijan in the wake of growing energy demand. The ECC also decided that the PNC will engage with all energy supplying companies in the process to finalise the best deal for the country.

Pakistan is currently importing 400mmcfd of LNG from Qatar under a bilateral sovereign agreement.

Other matters

The ECC also approved provision of  50,000 tons of wheat costing Rs2.1 billion to the United Nations World Food Programne for the temporarily displaced people of FATA and Khyber-Pakhtunkhwa.



The approved quantity will be distributed to the target population between December 2016 and June 2017. It is the second such approval after the provision of 124,000 tons of wheat valuing Rs5 billion to the displaced population; stocks from the earlier grant will exhaust in November as reported by the World Food Programme.  The ECC also approved the LPG Air Mix Plants in Murree (Kurbagla, Dewal, Company Bagh and Tret), Awaran and Bella at an estimated cost of Rs1.4 billion to be funded by the respective gas utility companies (SSGC and SNGPL) through their own resources.

It was also decided that in addition to the above mentioned plants 30 new air mix plants, each on SSGC and SNGPL system, will be constructed in AJK, Chitral, Gilgit-Baltistan and some areas of Balochistan.

Published in The Express Tribune, November 1^st, 2016.

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