PM steps in to save power firm from default
On the intervention by the Prime Minister Office, the power division has resolved a dispute over the signing of a formal power purchase agreement (PPA) to save NeelumJhelum Hydropower Company (NJHPC) from default.
The Rs510 billion power project attained 969MW generation capacity in August last year and has since been providing electricity to the national grid without any payment. The non-signing of the PPA between the Central Power Purchasing Agency (CPPA) and NJHPC had resulted in a circular debt build-up of about Rs75bn.
In recent meetings with various top functionaries, NJHPC chief executive officer Brig Mohammad Zareen had warned that non-payment of dues would have serious political, financial and reputation risks to the government.
This was because the delayed payments would require the government to increase consumer tariff to clear its backlog of over Rs75bn and avoid exposing the guarantees of the government and Water and Power Development Authority (Wapda) to default.
A senior official told media that the PM Office had intervened and asked the power division to resolve the matter at the earliest. Power division secretary Irfan Ali heard viewpoints of the CPPA and NJHPC. This was followed by a meeting of the CPPA board of directors, which approved the signing of the PPA between the two entities.
The official said the two sides had now agreed to sign the PPA this week subject to its vetting by legal experts. The NJHPC had earlier reported that Wapda, the government and the company would go into default if its energy payments did not begin within a month as the power sector was using its unaccounted units for showing reduction in line losses.
"If revenue from the CPPA does not commence by December 2019, NJHPC/Wapda/GoP shall go into default due to back-toback guarantee, apart from NJHPC not meeting the routine maintenance expense," the NJHPC CEO reported on Nov 27.
He also reported that the Chinese contractor had left the project when it attained 99.6 per cent completion and some minor works were outstanding after shelling by the Indian army on the dam's site on July 30 and Oct 19-20 and 24 this year and was not willing to return. The NJHPC approached the foreign ministry, prompting it to take up the matter with Beijing and hopefully the contractor would soon resume the job as required under the warranties, he added.