The Finance Division of Pakistan has authorized the Power Division to withdraw Rs4 billion from the Pakistan Energy Revolving Account (PERA) for the sole purpose of making payments to Independent Power Producers (IPPs) under the China-Pakistan Economic Corridor (CPEC) for January 2024.
This decision follows an Office Memorandum submitted by the Power Division on February 7, 2024, which sought permission to access funds from PERA in line with a directive from the Economic Coordination Committee (ECC) on October 31, 2022.
The ECC had previously sanctioned the establishment of PERA at the State Bank of Pakistan with an allocation of Rs50 billion for the current fiscal year, allowing monthly withdrawals of up to Rs4 billion by CPPA-G.
This move comes as part of efforts to manage the country’s power sector’s financial obligations, which saw a 10.5 percent monthly growth in the July-December 2023-24 period, totaling Rs2.551 trillion.
Muhammad Ali, the caretaker Minister for Power and Petroleum, during a recent visit to China, confirmed that 88 percent of outstanding payments to Chinese IPPs had been cleared.
Specifically, payments for 2022 and 2023 billings reached 94 percent and 95 percent, respectively. He assured further improvements in payment processes are underway.
However, concerns have been raised by Port Qasim Electric Power Company (Private) Limited (PQEPC), one of the Chinese IPPs, regarding delays in payments that have resulted in liquidity issues for the company.
As of February 26, 2024, PQEPC’s outstanding receivables amounted to Rs88.38 billion (approximately $316.52 million), with delays extending beyond six months.
The company has urged immediate actions to mitigate the financial strain, highlighting ongoing negotiations to resolve foreign exchange availability issues that could increase the owed amount by Rs13.6 billion.
PQEPC’s CEO, Guo Guangling, has communicated the potential for the company to suspend operations without incurring liquidated damages as per their Power Purchase Agreement (PPA), emphasizing the mutual losses such an action would entail.
The company advocates for a prompt resolution to ensure continued power generation and prevent defaults on loan agreements and government guarantees.
