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First tranche of circular debt likely to be paid by tomorrow

IPPs to receive Rs90bn in first installment

admin-augaf by admin-augaf
June 3, 2021
in Business, Finance, International
Reading Time: 2 mins read
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Image: Circular Debt Clearence
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Islamabad June 03 2021: Central Power Purchasing Authority (CPPA) has started the process for transfer of funds to IPPs which is likely to be completed by tomorrow as per our sources.

Directions were forwarded by CPPA to respective companies yesterday in order to complete the payment disbursement method. This is in line to summary of Petroleum Division passed by Economic Coordination Committee (ECC) on May 5 2021 and ratified by Federal Cabinet on May 18 2021.

As per the approval, government has decided to release the first tranche of total amount of PKR403 billion. CPPA is going to release payment of first installment to 35 IPPs out of total 47 and decided to withhold payment to the remaining 12 IPPs (under the Power Policy 2002) owing to the National Accountability Bureau investigation as per approval of ECC.

In the first installment IPPs are going to receive 40 percent of total overdue receivables as on November 30 2021. The residual amount of 60 percent will be paid in six months after the signing of agreement.

Independent Power Producers are likely to receive payment in the mode of one third in cash, one third in the form of floating Pakistan Investment Bonds (PIBs) of 10 Years maturity and remaining in the shape of five year Sukuks.

As a result of payment, it lowers the burden of capacity payments or fixed costs the government pays to them under their ‘take or pay’ power purchasing agreements. This will help to lower the burden on consumers equivalent to PKR800 billion during the period of next 30 years. IPPs established under pre 1994 power policy and 1994 power policy had also agreed for termination of their Power Purchase Agreement against onetime compensation.

Source: Central Power Purchasing Authority

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Tags: BanksCircular DebtFirst InstallmentFloating BondsFloating PIBsIndependent Power ProducersIPPsPakistan Investment BondPIBPKR 800 billion savingPower Purchase AgreementSBPTermination
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