Energy sector: Circular debt likely to touch Rs 1.5 trillion

The country's energy sector circular debt is likely to touch Rs 1.5 trillion if the Khan administration delays getting Rs 200 billion Sharia'h compliant financing from a consortium led by Meezan Bank. Official sources told this scribe that Power Division wants to avail Sharia'h compliant financing of up to 600 billion with Rs 200 billion required immediately. Power Division and Power Holding Private Limited (PHPL) have expressed a preference for raising financing through issuance of Sukuk/Sharia'h compliant syndicated financing.
Officials confirm that the amount of circular debt is Rs 870 billion whereas Rs 610 billion is parked in the books of PHPL. With a new loan of Rs 200 billion through Islamic financing against assets of Discos and Wapda, power sector loans will touch Rs 810 billion. There is no apparent change in power sector's performance despite recent increase in electricity tariffs on the basis of uniform tariffs across the country for all categories of consumers, except domestic consumer using up to 300 units per month.
An official told this scribe that the approved amount of Rs 200 billion is expected to be released next week and Meezan Bank Limited, Faysal Bank Limited, Bank Islami Pakistan Limited, Dubai Islamic Bank Pakistan, MCD Islamic Bank Limited and Al Baraka Bank Pakistan Limited (mandated lead arrangers) have already submitted their offer to arrange a long-term Sukuk of up to Rs 200 billion. However, the release of the amount is delayed due to approvals, including SECP.
According to the Power Division, CPPA-G has to pay Rs 807.9 billion to Gencos', Wapda and IPPs, of which Rs 393.864 billion is energy purchase price, Rs 323.428 billion capacity payments, Rs 13.428 billion others and Rs 77.212 billion as interest as of December 31, 2018. However, the amount of power sector's receivables stood at Rs 870.5 billion which includes federal government Rs 10.4 billion, AJ&K Rs 51.1 billion, FATA, Rs 14.8 billion, agriculture tube-wells Balochistan Rs 238.4 billion, KE Rs 65.2 billion, provincial government Rs 48.5 billion, private (Discos) Rs 450.8 billion and IPPs Rs 1.8 billion as of November 30, 2018.
The Government of Pakistan as per approval of the ECC requested Nepra for deferment of Rs 146 billion (Rs 1.41/ unit) of NHP in tariff and passed through Rs 33 billion as part of notified tariff.
Of the total Islamic loan being raised, payments will be made to PSO on account of payment for fuel supplies through Hub Power Company (Hubco), Kot Addu Power Company (Kapco) and Generation Companies (Gencos) in addition to payments for RLNG. Further, payment on account of energy to coal-fired power plants will be made. Payment for capacity to nuclear power plants and Wapda to discharge their balance liabilities towards the NHP arrears of the province against Wapda's invoices to CPPA-G will be made. Balance payments will be made to IPPs against the outstanding capacity payments.