Five IPPs shut, 17 running at half-capacity as govt juggles with circular debt

ISLAMABAD: Five independent power producers (IPPs) have suspended electricity generation and 17 others are operating at just 46 percent of installed capacity because of the liquidity crisis brought about by the Rs1.3 trillion circular debt, a senior Power Division official disclosed.

The non- payment of dues by the government has brought about the closure of the Hubco, Nishat Chunian, Nishat Power,

Lalpir and Pakgen IPPs. Kapco has also reduced its power output, the official told The News on condition of anonymity. The Federal Minister for Energy, Omar Ayub Khan, has convened an emergency meeting with the management of the affected IPPs tomorrow to seek a resolution to the crisis.

As of September 30, the government owed the IPPs the mammoth amount of Rs248 billion, while a further Rs109 billion was due to Kapco. Arial"; mso-fareast-font-family:"Times New Roman"">In addition to the circular debt, the IPPs are awaiting sales tax refunds of more than Rs30 billion. Wapda entities are also owed over Rs100 billion.

“The IPPs’ managements do not have enough money to keep their power plants operational. That is why out of 22 IPPs, five have closed down their operations and the remainder is operating at 46 percent of their capacity,” the official said.

The 1,200MW Hubco power plant has been virtually dysfunctional since September 4, when PSO refused to supply it with fuel after arrears reached Rs68 billion. Hubco blames the situation on the government for not paying its dues.

“Various contractual obligations are being violated on an ongoing basis, with severe financial implications for the IPPs,” the Power Division official said. More IPPs could cease power generation if the cash-strapped government does not come up with a plan to bail them, he said.

But it lacks the liquidity to settle its bills with the IPPs, and is expected only to offer them partial clearance of their dues at the meeting called by the energy minister. Overall, the government has incurred power sector losses of Rs187 billion over the last five years, in addition to the Rs1.3 trillion funding shortfall. It is also faced with annual losses of Rs292 billion from inefficient transmission and bill recovery.

Of that, Rs244.3 billion is owed by the federal government, and Rs500 billion by 5.3 million occasional defaulters and 1.3 million permanent defaulters. With the International Monetary Fund demanding action as a condition for a balance of payments support bailout being sought by Pakistan, the government may have little choice but to pass on the Rs650 billion-burden to end consumers, the official said.