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IPPs to move courts against sovereign guarantee default

A big blow to govt

KARACHI: The eight independent power producers (IPPs) have decided to take the legal course for the recovery of their dues against which the government of Pakistan has already committed sovereign default, sources said on Tuesday.

The sources in Independent Power Producers Advisory Committee (IPPAC) said that eight IPPs after waiting for several weeks from the date of sovereign default and the letter of the ministry of water and power, requesting IPPAC to hold its members to take any action for the clearance of their overdue payments, had decided to take the legal course.

Official at one of the IPPs, while confirming adopting the legal course said that they are not left with any other option, as even the daily payments were not being made in full to meet the fuel and daily expenses.

“The less generation is purely due to non-payment of GoP and the power purchaser,” he said.

An industry expert said that once the legal course was adopted, the investment in electricity sector would be at hold till the decision of appropriate court arrived on the sovereign default of the GoP.

The sovereign guarantee was the corner stone of the 2002 policy for lenders, as well as the investors and now this trust had been lost.

The sources said that eight IPPs had served five notices, invoking sovereign guarantee for overdue payments worth Rs65.83 billion.

The affected IPPs include Atlas Power, Nishat Power, Nishat Chunian, Liberty Tech, Orient Power, Saif Power, Halmore Power and Sapphire Electric, they added.

These IPPs have to-date received only Rs22.5 billion against the claimed amount that too for generating electricity and the electricity worth Rs22.5 billion has already been dispatched to the power purchaser.

An amount of Rs43.34 billion is still unpaid by the government, the sources said, adding that the power purchaser default every time if it failed to make payment within 30 days after the invoice was sent by the IPPs.

Payment default occurs if the IPP issues notice for the payment of overdue amount to the power purchaser and informing the government that payment default had occurred at the part of the power purchaser.

If the payment is still not made by the power purchaser within 30 days from the date of default notice, the IPPs are entitled to invoke the sovereign guarantee of the government of Pakistan that has to be honoured within 10 days, the sources said.

After expiry of 10 days the sovereign default occurs.

Out of five notices given by the IPPs, the sovereign default occurred in four cases, while the final demand for recovery of fifth notice was issued on June 2 and the sovereign default on fifth notice would occur on June 17, if the government failed to make this payment, as well, the sources added.

According to details provided by sources at IPPAC, the overdue amount of Nishat Power is Rs8.014 billion after the government paid Rs3.510 billion against five notices.

The government owes Nishat Chunian Rs8.690 billion, Liberty Tech Rs8.093 billion, Orient Power Rs4.283 billion, Saif Power Rs2.495 billion, Halmore Power Rs1.295 billion and Sapphire Electric Rs2.383 billion and Atlas Power is to be paid Rs7.990 billion.

Even after a lapse of 21 days, the government has not released Rs18.45 billion that was approved by the Economic Coordination Committee on May 15 to recover government from the sovereign default, the sources said.

The sources alleged that a group is bent upon creating hurdles in the smooth execution of the ECC decision, which was only aggravating the energy crisis.

Only one plant has achieved the financial close during the tenure of this government, as no new investor in private sector is willing to invest in this industry in the present circumstances.

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