The power sector of Pakistan is facing a looming crisis due to a shortage of foreign exchange, as Independent Power Producers (IPPs) are at risk of shutting down their power plants due to non-payment of approximately $710 million. IPPs have written letters to the federal government, highlighting their outstanding payment issues and warning of severe financial loss if their concerns are not addressed.
The situation has worsened for IPPs as their power engines are due for overhaul, and spare parts have not arrived due to non-payment. This has resulted in a halt in the production process of electricity, causing heavy losses for the companies. Non-remittance of funds through the State Bank of Pakistan is a breach of contract, and IPPs have warned that they will take strict action as per the agreement if the situation does not improve. The IPPs have requested the federal government to resolve their problem arising out of delay in dividend remittances to foreign shareholders, non-payment by banks to foreign suppliers against Letters of Credit (LCs), and the availability of foreign exchange through the State Bank of Pakistan.
The CEO of Atlas Power, Razi ur Rehaman, has written to the MD of Private Power and Infrastructure Board (PPIB), requesting urgent intervention to resolve the matter. The CFO of Attock Gen Limited, Adil Farooq Qureshi, has also highlighted the GoP’s obligation to make foreign exchange available to the company through the SBP.
Meanwhile, Kashif Bashir Rana, CEO of Orient Power Company (Private) Limited, has requested that the matter be taken up with SBP on priority for expeditious resolution and payment of pending dividend to restore the confidence of foreign investors and attract much-needed foreign investment to the country.
The MD of PPIB has requested the State Bank of Pakistan to facilitate IPPs for their foreign payments to fulfil their contractual obligations and avoid the risk of creating serious financial and legal implications for the Government of Pakistan and/or its representative entities for potential breach of commitments and obligations made under the Implementation Agreements/Power Purchase Agreements.
