Rs100bn offered to replace govt equity in NPPMCL

ISLAMABAD: The government on Monday was offered Rs100 billion worth of commercial loans to replace its excess equity and loan in National Power Parks Management Company Limited (NPPMCL), currently under the privatisation process, which will ease some burden off the national exchequer.

The successful bank syndicate includes eight conventional and Islamic banks including Habib Bank Ltd, Meezan Bank Ltd, National Bank Ltd, Faysal Bank, Bank Alfalah, Bank of Punjab, BankIslami, United Bank Ltd, and a development finance firm namely Pak Kuwait Investment Company.

NPPMCL was formed to reduce the electricity/power demand-supply gap in Pakistan. Two power plants, including 1,230 MW combined cycle power plant Haveli Bahadur Shah in Jhang and 1,223 MW combined cycle Balloki in Kasur, are operating under it.

The government will divest up to 100 percent of its shareholding in NPPMCL to a potential investor along with management control. This led to the recapitalisation of the government’s equity and sovereign guaranteed debt, refinancing it with long-term project loans on a commercial basis.

NPPMCL received this response from a syndicate of local banks for project financing over Rupees 100 billion.

The Privatisation Commission has structured and executed the transaction with the Ministry of Finance and NPPMCL without the support of any financial adviser or intermediary, saving a significant amount in fees.

Federal Minister Mohammedmian Soomro appreciated the prospects and expressed his gratitude to banks for showing a willingness to finance the project.

“We are heading on the way towards completing this landmark transaction within a stipulated time,” the minister said.

Saleem Ahmad, Chairman Privatisation Commission, also stated these indications from local banks not only underscored the depth and liquidity of capital markets in Pakistan but also reinforced the quality of the obligor risk and significance of the power sector.”

He acknowledged the critical importance of efficient capital structure in providing affordable electricity to the consumer and enabling the sale of the entity to blue-chip investors and operators.

Ministry of Privatisation had also initiated the sale of the equity portion of NPPMCL, and the process would run parallel to the debt-refinancing.

It is to be noted that the process of privatisation is at an advanced stage. Around 70 percent of the project cost is based on long-term financing. As per the allowed benchmark, long-term financing requirement, including repayment/adjustment of federal government-guaranteed loan, presently stands at Rs103.765 billion.