ISLAMABAD: The Finance Division has allowed Power Division to draw Rs4 billion from Pakistan Energy Revolving Account (PERA) for onward exclusive payment to Independent Power Producers (IPPs) established under China Pakistan Economic Corridor (CPEC) for the month of January 2024, well informed sources told Business Recorder.
Power Division, sources said, sent an Office Memorandum (OM) to Finance Division on February 7, 2024, seeking permission to draw amount from PERA in accordance with the decision of Economic Coordination Committee (ECC) of the Cabinet on October 31, 2022.
Finance Division also asked Power Division/CPPA-G to draw amount after completion of all codal, financial, procedural and legal formalities as per laid down rules and regulations.
Chinese IPPs: MoF seeks update on payment issues
The ECC on a summary of October 31, 2022 approved opening of Pakistan Energy Revolving Account (PERA) at State Bank of Pakistan with Rs50 billion allocations to be utilized during CFY-23. CPPA-G was allowed to withdraw a maximum of Rs4 billion per month.
The country’s power sector stood at Rs2.551 trillion during first six months (July-December) 2023-24, showing 10.5 percent growth in flow per month Rs40 billion.
The caretaker Minister for Power and Petroleum Muhammad Ali during his last visit to China had informed Chinese authorities that overall 88 percent outstanding payments had been made to Chinese IPPs, adding that against 2022 billing, 94 percent payment had been made whereas against 2023 billing, 95 percent payment was made. He assured Chinese authorities that working is in progress for further improvement in payments.
However, one of the Chinese IPPs i.e. Port Qasim Electric Power Company (Private) Limited (PQEPC), in a recent letter expressed serious concerns on delay in payment which has created liquidity issues for the company.
The total amount of receivables of PQEPC has reached Rs88.38 billion i.e. $ 316.52 million by February 26, 2024, with a delay payment period of over six months which could further escalate.
According to the company, in this case, project stakeholders/ sponsors from China and Qatar have disclosed significant discontent and request immediate necessary measures to reduce the outstanding amount.
The Company also highlighted that Settlement Agreement for revolving the CPP deduction issue due to non-availability of foreign exchange has been initiated by both parties. Following, the official signing of the agreement, the amount will be increased by Rs13.6 billion.
“Current due amount entitles PQEPC to proceed to suspend the plant operation according to PPA Section 9.10 without any Liquidated Damages (LDs),” said CEO Guo Guangling, in a letter to caretaker Minister for Finance.
The company argued that it has comparative advantages on the Energy Purchase Price (EPP) tariff, compared with other oil and RLNG power plants, adding that in this regard, project suspension will be a lose-lose situation that both sides must jointly make efforts to avoid. Therefore, timely settlement of due amount of the project is immediately required to ensure the sustainable power generation and avoid constitution of loan agreement default and GoP sovereign guarantee default.
