muhammadhafeezmalik
SENIOR MEMBER
- Joined
- Jan 21, 2015
- Messages
- 5,417
- Reaction score
- -17
- Country
- Location
The problem started with Musharraf, WAPDA was unable to pay the IPPs threatened that they will call the GoP Guarantee. At this point, Ehteshab Bureau was unleashed on them, and rather than dealing with issues commercially, they were threatened and fake cases were created against them. Eventually under pressure of various foreign governments, the GoP backed off and asked for a commercial renegotiation of the very rate that it had itself offered. Not left with much choice, most IPPs provided some rate reductions and continued to run the plant. The country that was lauded as having the best power policy in the developing world overnight became a pariah in the international energy investors community.
In 2002 Policy, almost all projects were done by local investors. This time all lenders were also local since no foreign lender was interested. The payment situation did not get any better. In 2011-12, the backlog of payments had ballooned to a point that most IPPs started shutting down intermittently. WAPDA (by now NTDC) first agreed in writing that it would not penalize the IPPs for these shut downs, but after a few months changed its mind and decided to impose penalties for shutdowns, even when these shutdowns were occurring because of its own payment defaults. At this point, the 2002 Policy IPPs called the GoP Guarantees and went to Supreme Court. The GoP went into default, acknowledged that it owed the money, but told the SC that it did not have the resources, and needed more time. Eventually the IPPs agreed to an installment plan. But this worked only for old payments, while new bills were being generated, and accumulated again. The PML-N Government cleared these past bills in June 2013, for power already consumed 1-2 years before that. The Auditor Generals’ report about this matter does not question that IPP payables per se, but rather questions the internal procedure followed by GoP in paying the subsidy to NTDC, but it does raise some issues that show either lack of understanding of the signed contracts or expresses desire to re-open the agreements a second time around. In December 2014, many IPPs once again called on GoP Guarantees because of mounting receivables, and the GoP paid them some portion, and promised to clear all amounts in a few months. The IPPs withdrew their Guarantee calls but this GoP promise was once again breached.
Similarly, NTDC has, facetiously enough, disputed all prior bills without giving the specifics as to what is against the contract, even the ones that it has verified and paid, to avoid the possibility of any GoP Guarantee call being made.
So with this history, who is the third generation investor, since in the current round of thermal and hydel projects under 2015 Power Policy, with the exception of one, no prior investor of 2002 Policy or 1994 Power Policy is doing a project. It is our Chinese friends, who have been good allies of Pakistan, but this friendship is not blind when it comes to commercial matters. In addition to GoP Guarantees, this new round of projects had to be given many more protections than even the 2002 Policy projects. Two of them are telling: (i) there is a funded cash escrow amount of PKR [50] billion from GoP since GoP Guarantee does not seem to be sufficient, and (ii) what was previously a protection in law with NTDC chose to violate it, has now been converted to a contractual commitment: if a Chinese owned plant shuts down because of non-payment, NTDC cannot impose LDs and still has to pay fixed charges. Putting aside the discrimination angle this creates amongst different types of investors, these two changes demanded by Chinese investors in the contracts clearly point to the sordid history of disregard for sanctity of contracts.
