Closure of HUBCO, KAPCO imminent

Pakistan State Oil stops the supply of fuel to the Hub Power Company and Kot Addu Power Company.

KARACHI: Pakistan State Oil has stopped the supply of fuel to the Hub Power Company and Kot Addu Power Company. Fuel inventories of both independent power providers will be exhausted by Saturday night and the plants may face closure.

“Fuel supplies to Hubco and Kapco have been cut off due to the non-payment of dues,” confirmed PSO officials. “Hubco owes the company Rs56 billion, while dues from Kapco stand at Rs27 billion,” said the PSO spokesperson, adding that PSO would not resume supplies until the company received guarantees for repayment of the outstanding amounts.

The official explained that daily fuel supplies to Hubco and Kapco stand at approximately 5,000 tons and 2,500 tons, respectively. “The total amount of furnace oil supplied to Hubco since September 1 is 74,653 tons while 39,389 metric tons have been supplied to Kapco during the same period.”

The official asserted that prior to halting supplies repeated attempts had been made by the management to address the ballooning receivables but PSO was yet to obtain a favourable response.

Meanwhile, sources contend that the current fuel inventories available with both independent power providers (IPPs) are only enough for them to continue operations till Saturday.

Both providers have regularly pinned the blame for not clearing dues on the Pakistan Electric Power Company (Pepco), stating that their ability to compensate suppliers is hampered due to non-payment of receivables by Pepco.

The Hubco and Kapco management could not be contacted despite several attempts.

PSO near default

PSO, once again, has encountered dire financial straits, with its total receivables towering to a mammoth Rs149 billion. “PSO is on the verge of default if outstanding receivables are not paid immediately,” officials told The Express Tribune.

According to PSO, of the Rs149 billion due, Rs120 billion are owed by customers from the power sector.

“The awarding of import tenders for deliveries over the next two months have also been delayed until a guarantee of payments along with plans for the intended reimbursement are submitted to PSO by Pepco and other power sector customers,” disclosed the official.

The delayed import tenders would have amounted to about 650,000 tons of petroleum products and a delay or cancellation in delivery may hold dire consequences for the country’s energy sector.

PSO officials also contested media reports that Pepco had agreed to release Rs12 billion from its outstanding dues.

“Till Friday, we had not received any update from Pepco, nor have the funds been transferred, so this will have to be after the weekend at the earliest.”

Sources within the federal ministry for petroleum and natural resources, however, contended they have repeatedly instructed Pepco to pay the dues owed to PSO, but declined to comment on how and when the current crisis will be tackled.

Published in The Express Tribune, September  18^th, 2010.