Over 100 percent payments made to IPPs: ministry

Says power producers have failed
to meet contractual requirements; claims are unrealistic

ISLAMABAD: The Ministry of Water and Power has strongly rebutted a statement of the Independent Power Producers (IPPs) forum that the power sector’s circular debt is Rs665 billion.

It also said the IPPs in general had not been meeting their contractual requirements on their part e.g. maintenance of fuel oil stock etc. To bring in more transparency into the system, heat rate testing and performance audit of IPPs was proposed which has been declined by the IPPs stating that they are not liable to the audit under the agreement signed with the power purchaser.

In a statement issued here, spokesman for the Ministry of Water and Power said the IPPs statement carried in a section of the print media clearly showed a lack of understanding and authentic data to comment on such a sensitive issue.

He said the IPPs during last financial year had been paid more than 100 percent of their billed amounts. Hubco Power Company, which is a plant on lower efficiency despite being an outages due to its poor maintenance and plant age, has been paid more than 100 percent of its billed non-fuel invoices during the previous year. 

The same plant on its commitments for coal conversion of existing plant which were made as an actionable item during the circular debt clearance and commitments on attaining financial close as part of the CPEC projects were not met

The spokesman added that the IPPs forum statements as approved in the print media also failed to capture the efforts that have been made in developing and re-enforcing the existing transmission and distribution infrastructure to make them capable of additional power flows that are projected for the year 2018 by introduction of new power plants under public sector, CPEC and other initiatives, to eliminate the load shedding in the same year.

The spokesman said the government after taking office adopted a long-term strategy to stabilize the power sector which is essential in restoring macroeconomic stability and enhancing economic growth. 

The government developed a comprehensive power plan to support the current and future energy needs of the country by addressing power sector chronic problems in governance, liquidity, regulation, infrastructures and generation enhancement. This entire plan has been put in place with the requisite initiatives taken up in the most transparent and systematic manner. 

He said that the policies that have been put in place have started showing positive results and the improved efficiency indices are proof of the same.  To introduce liquidity for the sector payment of Rs480 billion was made in June, 2013 to first ease of the liquidity crunch being faced by the sectorial entities specially IPPs, oil and gas entities.

The purpose of this first action was to create liquidity in the sector so that other policy actions can be put in place. The policy actions set forth has resulted in improved recovery ratios of 94.5%, record high during the last 10 years and reduction in losses to 17.9% also lowest over the same period of time. 

The reform also included a greater transparency and public disclosures of all financial transaction in the power sector which are independent of any personnel follow up or individual influence. In addition by utilizing the most efficient power plant, strict adherence to economic merit order, not only resulted in improved liquidity of the sector but also limited the growth of circular debt which stands at about Rs. 329 billion. 

Such bold and baseless statements at the forum of IPPs is very discouraging and is not expected from the sectorial entities which are part and parcel of the government resolve for bridging the supply and demand gap.