SBP allows Rs 1.5 billion financing for power company

The State Bank of Pakistan (SBP) has allowed banks and DFIs up to Rs 1.5 billion financing for power company, established as a wholly owned subsidiary of the eligible export oriented company to meet its power requirements. The SBP has already allowed financing for import of generators and captive power plants, used in the eligible sectors/sub-sectors under Long Term Financing Facility (LTFF), however, the State Bank was receiving the requests of power companies, being established by the export oriented companies as wholly owned subsidiaries to meet their power requirements, for financing under LTFF scheme for plant & machinery.
Therefore, in order to facilitate and support the export-oriented companies to overcome problems arising out of the prevailing power crises, the SBP has decided to allow financing of power company, established as a wholly owned subsidiary of the eligible export oriented company to meet its power requirements. However, the export oriented company will be required to utilise at least 70 percent of the power for producing exportable goods.
According to IH&SMEFD Circular No 16 of 2015, banks and DFIs may consider financing request of a power company under LTFF which is established as a wholly owned subsidiary of the eligible export oriented company to meet its power requirements. Banks or DFIs may consider the financing request of the power company if its holding company or project has minimum export sales prescribed under the facility viz annual exports equivalent to $5 million or 50 percent of sales whichever is lower, it added.
The SBP said financing banks and DFIs will be required to ensure or verify that the power company to be financed under LTFF shall provide at least 70 percent of the power to its export oriented holding company for producing exportable goods. In addition, the export oriented holding company shall furnish an undertaking for purchase of at least 70 percent of the power from the power company during the loan period.
According to State Bank, under the aforesaid arrangements, maximum financing limit of a single power company will be Rs 1,500 million under LTFF. Further, Letter of Credits (LCs) established up to 30th June 2017 only will be eligible for refinancing under LTFF. The SBP has warned banks and DFIs that any violation of the terms & conditions of LTFF including any abuse of the facility will result in imposition of penalties. All other terms and conditions of LTFF shall remain the same, it added.