30-day deadline: Nine IPPs serve another notice seeking payment
After serving a 30-day notice on the government for the release of Rs31.16 billion dues on August 25, nine independent power producers (IPPs) served on the government another notice on September 10 for Rs14.70 billion, which became due on September 1, taking their total dues to Rs45.95 billion.
According to a press release on Monday, the IPPs will invoke sovereign guarantees of the government of Pakistan if the payments are not made within 30 days.
The statement said that Pakistan Electric Power Company (Pepco) not only failed to clear the dues, but also penalised the IPPs for serving the notice, further deepening the crisis.
It said that the nine IPPs were being denied even normal, smaller payments that other IPPs received regularly because they had threatened to call sovereign guarantees.
It added that the notices were in accordance with the agreements the IPPs signed with Pepco and the government of Pakistan. A few months back, four out of the nine IPPs had invoked sovereign guarantees and the government then arranged payments to them.
The statement quoted the director of one of the nine IPPs as saying that Pepco defaulted on payments frequently and as a result the sovereign guarantees had to be called, which put the government in an awkward position internationally.
“This time around, it seems that vested interests have made things worse by advising Pepco to stop daily payments, which will eventually result in closure of these plants,” the statement quoted the director as saying.
According to the statement, Pepco owes Atlas Power Company Rs7.18 billion, Attock Generation Rs9.61 billion, Liberty Power Rs6.74 billion, Nishat Chunian Power Rs6.6 billion, Orient Power Rs3.8 billion, Nishat Power Rs6 billion, Sapphire Electric Company Rs1.48 billion, Halmore Power Rs1.2 billion and Saif Power Rs3 billion.
Published in The Express Tribune, September 13th, 2011.
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Issue of circular debt is hurting Pakistan's economy. With floods, the economy will again under perform and power and gas shortage will cripple the manufacturing sector, resulting in reduced exports.
Where is the economic team of Pakistan? Can anyone tell us how much we will suffer and for how long?
If we could only plug corruption, things will improve, who will act here?
Some of these IPPs got there Power Purchase Agreements signed by representing to Pepco that they had assured and adequate fuel supplies for the duration of the PPAs, while in reality they did not have this. In some cases all they had or cared to get were letters with two years of fuel supply commitment. This is a gross misrepresentation to the buyer of power. Despite this misrepresentation, a risk that is purely due to IPPs negligence or incompetence, the IPPs continued to receive capacity payments related to fuel supply disruptions for extended periods of time. These payment are in billions of rupees. This money paid is not due to power buyers fault and should be returned or adjusted in the payments these IPPs are asking. Further, a power buyer should not be and never is subjected to fuel supply disruptions since the causes of this are beyond and not in control of Pepco and not related to any of its actions. Further, it is unethical on the part of these IPPs to even ask for these capacity payments. Pepco has a very strong case and should seek forums where fuel supply disruption related capacity payments are returned or adjusted. This is not due to any action on Pepco's part and it is morally and legally unjustified to seek these capacity payments.
There are other similar points in which the demand of these IPPs is technically, morally and legally unjustified. It is better to find a workable solution by discussion than by invoking sovereign guarantees. once invoked and if it ever comes to litigation, which I believe under the circumstances Pepco should seek as it has minimal or no risk of losing, the IPPs have a very weak case. Bottom line, there is no reason for Pepco or the Federal Government to succumb to pressure on international investment related arguments as this is already at its lowest ebb in Pakistan plus how low can it go further? IPPs should withdraw these threatening letters to invoke sovereign guarantees and seek a workable solution first by crediting or returning unethical capacity payments they were paid in the past. Empty and baseless shots are being fired at Pepco without legal or moral justification.