SSGC, K-Electric spar over payment of gas bills

Former says power utility defaulting since 2008, K-Electric insists it is paying bills regularly

ISLAMABAD: In another dispute between big companies, Sui Southern Gas Company (SSGC) has alleged that K-Electric had started defaulting on payments for gas supply after being taken over by the Abraaj Group.

However, K-Electric has forcefully denied the allegation, saying it has been regularly clearing gas bills since January 2012.

According to officials aware of the development, the SSGC management, in a high-level meeting held on August 12, said the power utility was currently its largest customer and owed Rs58.33 billion as on June 30, 2015.

According to SSGC, K-Electric started defaulting on payments in 2008 soon after the Abraaj Group took control of the company. Several plans were prepared to clear the outstanding bills, but K-Electric could not meet the commitment and the overdue amount kept on increasing over time.

It told the meeting that K-Electric accepted late payment surcharge in respect of overdue bills until the end of June 2010. Afterwards, it stopped acknowledging the surcharge and started accruing the amount on net basis.

SSGC also took up the matter with the Securities and Exchange Commission of Pakistan, the corporate regulator.

SSGC had been supplying gas to K-Electric under a sales agreement for only 10 million cubic feet per day (mmcfd). Efforts made by the gas utility to enter into a new agreement failed because of various reasons.



In response, the chief executive officer of K-Electric told the meeting that Karachi Water and Sewerage Board (KWSB) being a strategic customer under an implementation agreement could not discharge its obligation relating to electricity dues.

Despite this revenue shortfall, he said, the power company was still making payments to fuel providers including SSGC.

At present, KWSB owes Rs700 million to K-Electric and is not paying a single penny. Under Article 2.5 of the implementation agreement, the Government of Pakistan is liable to pay the outstanding energy dues of strategic customers in case of default.

K-Electric’s view

Speaking to The Express Tribune, a K-Electric spokesman dismissed the talk of default, insisting that the company had been regularly paying SSGC bills since January 2012.

He pointed out that arrears, estimated at only Rs20 to Rs21 billion, were disputed as SSGC had imposed high interest rates on the bills.

A payment plan was signed in 2013 and regular payments were being made to SSGC, the spokesman said, adding the issue of arrears was still to be settled because of the dispute over high interest charges.

He stressed that K-Electric was ready to sign a gas sales agreement, but SSGC was reluctant and recalled that the Economic Coordination Committee had approved allocation of 276 mmcfd of gas to the power company, however, SSGC was not ready to commit the volume.

Published in The Express Tribune, August 27^th,  2015.

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