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Foreigners receive negative investment advisory

The ever-accumulating circular debt and non-payment to independent power producers (IPPs) by the government has started taking its toll as potential foreign investors are receiving negative investment advisory for the country’s energy sector, industry sources said.

It was learnt that MMC Corp of Malaysia has received an advisory by OSK Research – a leading investment advisor based in Kuala Lumpur – that their possible venture into Pakistan’s power generation industry may be a risky investment.

It may be mentioned here that MMC via its 51 percent-owned subsidiary, Malakoff Corp Bhd, is looking to venture into the energy sector in Pakistan.

It has proposed to the Pakistani government to set up two power plants, which include a 1,200 megawatt imported coal-fired project and a 250 megawatt wind power project.

According to a report, high oil prices, electricity theft and loss imply that the distribution companies have been unable to pay the independent power producers (IPPs) in Pakistan.

The government has to pay Rs42 billion to the IPPs, while the IPP association has threatened to shut down 1,800 megawatt of power generation if that amount was not paid.

Malakoff has completed the feasibility study of the 1,200 megawatt plant and is awaiting notification of feed-in-tariff for the coal power project by Pakistan’s National Electric Power Regulatory Authority (NEPRA), expected to be finalised next month.

It may be mentioned here that as many as eight IPPs have submitted their final 10-day notice to the government seeking clearance of their outstanding dues of Rs34 billion.

This notice of sovereign guarantee is to end on May 2nd, 2012, after which they will shut down their plants as they will not be in a position to buy more fuel to run the plants.

Earlier, these eight IPPS served the initial notice to the government for their payments of Rs34 billion, which PEPCO had failed to pay within the prescribed time.

Sources in the advisory council of IPPs informed that they would also serve the final notice for recovery of another Rs9 billion to the government, for which they had already served the initial notice on April 2. Moreover, IPPs will also serve a final notice for the recovery of another Rs4 billion in May.

Ironically, the government instead of clearing such outstanding dues kept asking the IPPs to withdraw their notices.

Despite a number of meetings between the representatives of IPPs and the Ministry of Water and Power along with the Finance Division before submitting the final notice, the government was still nonchalant towards the financial woes of the IPPs.

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