Power firms plagued with losses, low revenues, govt admits
These lead to fall in electricity production and increase in outages
These issues were adding to the cost of generation and were affecting cash flow of distribution companies, limiting their ability to settle their power purchase liability. PHOTO: FILE
ISLAMABAD:
The Ministry of Water and Power has acknowledged that power companies are still plagued with high losses, outstanding payments, low revenue collection and more reliance on expensive thermal power production, which have led to a reduction in overall electricity generation and prolonged outages.
In a meeting of the Economic Coordination Committee (ECC) on June 28, representatives of the ministry said power distribution companies were still finding it difficult to clear long outstanding dues of the Central Power Purchasing Agency (CPPA).
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For the inability of power companies, they blamed high distribution losses, less subsidy, low revenue collection, lower applicable tariff and increase in thermal power generation.
This admission of failure on the part of power ministry comes in the backdrop of Pakistan Muslim League-Nawaz’s (PML-N) election campaign in 2013 when it hit out at the ruling Pakistan Peoples Party for being unable to control prolonged load-shedding and promised to bring outages to an end after coming to power.
“These issues were adding to the cost of generation and were affecting cash flow of distribution companies, limiting their ability to settle their power purchase liability towards the CPPA,” the ministry told the ECC.
“Therefore, the CPPA cannot pay the power purchase cost to the independent power producers (IPPs) and generation companies, which ultimately leads to a drop in power generation and increase in load-shedding.”
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The power distribution companies were in such a poor financial health due to bad governance and inefficiency that the ministry was compelled to seek an extension in the repayment period of term finance facility worth Rs7.48 billion from 15 months to five years including the extension in grace period from three months to 24 months.
The ECC was told that in an earlier meeting on August 12, 2015 the committee had allowed the Finance Division to issue sovereign guarantees for the Rs7.48-billion syndicated term finance facility for the power sector.
An agreement for the facility had been reached between Power Holding Private Limited and a Habib Bank-led syndicate on June 29 last year.
So far, the Finance Division has paid two installments of mark-up totalling Rs330 million through Power Holding Private Limited.
Inflated bills behind improved recovery rate of power firms
The three-month grace period had ended and payment of quarterly installments of the principal amounting to Rs180 million had been due from January 2, 2016.
On the advice of Finance Division, Power Holding later negotiated with the syndicate a restructuring of the facility and it agreed to extend the repayment period from 15 months to five years including the extension in grace period from three months to 24 months. Other terms and conditions would remain the same.
Following the agreement, the payment of installments of the principal will be deferred till October 2, 2017.
The ECC approved the arrangement for extension in repayment period for the financing facility.
Published in The Express Tribune, July 16th, 2016.
The Ministry of Water and Power has acknowledged that power companies are still plagued with high losses, outstanding payments, low revenue collection and more reliance on expensive thermal power production, which have led to a reduction in overall electricity generation and prolonged outages.
In a meeting of the Economic Coordination Committee (ECC) on June 28, representatives of the ministry said power distribution companies were still finding it difficult to clear long outstanding dues of the Central Power Purchasing Agency (CPPA).
CASA-1,000 power project: European firms vying to set up converter stations
For the inability of power companies, they blamed high distribution losses, less subsidy, low revenue collection, lower applicable tariff and increase in thermal power generation.
This admission of failure on the part of power ministry comes in the backdrop of Pakistan Muslim League-Nawaz’s (PML-N) election campaign in 2013 when it hit out at the ruling Pakistan Peoples Party for being unable to control prolonged load-shedding and promised to bring outages to an end after coming to power.
“These issues were adding to the cost of generation and were affecting cash flow of distribution companies, limiting their ability to settle their power purchase liability towards the CPPA,” the ministry told the ECC.
“Therefore, the CPPA cannot pay the power purchase cost to the independent power producers (IPPs) and generation companies, which ultimately leads to a drop in power generation and increase in load-shedding.”
Consumers reeling: To clear bank loans, power firms recovering inflated bills
The power distribution companies were in such a poor financial health due to bad governance and inefficiency that the ministry was compelled to seek an extension in the repayment period of term finance facility worth Rs7.48 billion from 15 months to five years including the extension in grace period from three months to 24 months.
The ECC was told that in an earlier meeting on August 12, 2015 the committee had allowed the Finance Division to issue sovereign guarantees for the Rs7.48-billion syndicated term finance facility for the power sector.
An agreement for the facility had been reached between Power Holding Private Limited and a Habib Bank-led syndicate on June 29 last year.
So far, the Finance Division has paid two installments of mark-up totalling Rs330 million through Power Holding Private Limited.
Inflated bills behind improved recovery rate of power firms
The three-month grace period had ended and payment of quarterly installments of the principal amounting to Rs180 million had been due from January 2, 2016.
On the advice of Finance Division, Power Holding later negotiated with the syndicate a restructuring of the facility and it agreed to extend the repayment period from 15 months to five years including the extension in grace period from three months to 24 months. Other terms and conditions would remain the same.
Following the agreement, the payment of installments of the principal will be deferred till October 2, 2017.
The ECC approved the arrangement for extension in repayment period for the financing facility.
Published in The Express Tribune, July 16th, 2016.