ECC approves Rs185bln loan proposals to settle circular debt

ISLAMABAD: The Economic Coordination Committee (ECC) on Thursday approved proposals of the ministry of water and power to borrow Rs185 billion from a syndicate of local banks to set off liabilities of power distribution companies. 

“The ECC considered and approved four proposals of the ministry of water and power for the issuance of new sovereign guarantees by ministry of finance in respect of fresh syndicated term finance facilities for Power Holding (Private) Limited in order to set off/adjust existing facilities,” said a statement.  

Finance Minister Ishaq Dar chaired the meeting. 

Power ministry, in its summaries, sought permission from ECC to borrow cumulative Rs154 billion afresh to settle loans of power distribution companies.

ECC said ministry of finance will provide government guarantee for the repayment of loan as well as interest for the fresh facilities. “In all four cases, the principal installment payments shall be deferred for a further period of 2 years from the date of execution of the fresh facilities.” 

The Economic Coordination Committee also approved a proposal of the ministry of water and power, regarding an existing term finance facility for Power Holding (Private) Limited, to restructure the facility by extending the tenure of the facility from 7 years to 10 years, including extension in grace period from 3 years to 6 years. 

In May 2014, Power Holding (Private) Limited signed an agreement with a consortium of local banks for Rs30.95 billion worth of loan to pay off liabilities of power distribution companies. Initially, the loan tenure was for up to five years at 6-month Karachi interbank offered rate plus two percent mark-up of per annum. 

Sources said the principal installments of around five billion rupees due semi-annually could not be paid due to financial constraints. 

Power ministry, in its summaries, said the power sector’s recovery improved to 93 percent in 2015 and 2016 from 88 to 89 percent earlier, while transmission and distribution losses were reduced to 17.8 percent by the end of 2016 from 19 percent in 2014, generating Rs116 billion
in savings for the power sector. 

Further, the ECC, after considering and deliberating upon another proposal of the ministry of water and power, approved the standard implementation agreement for transmission line projects under Policy Framework for Private Sector Transmission Line Projects 2015.

As per the same proposal, the Economic Coordination Committee also approved the transmission security analysis for high-voltage direct current transmission project of 660 kilovolts Matiari-Lahore.