The Ministry of Finance is said to have negotiated Rs 30 billion term finance facility from a consortium of local banks by issuing a 'Letter of Comfort' instead of Government of Pakistan guarantee, sources close to Secretary, Finance told Business Recorder here on Wednesday.
Sources in the Ministry said that funds have been arranged without finalisation of critical formalities, including rate of interest on loans to be paid by Pepco.However, when an official on contact did not deny the issuance of 'Letter of Comfort' but clarified that every issue had been settled by Zafar Sheikh, DG, Central Directorate of National Savings (CDNS) with banks.
Sources said that Pepco has written a letter to State Bank of Pakistan (SBP) Governor Dr Shamshad Akhtar, stating that Pepco and Finance Ministry had mandated a consortium of banks comprising National Bank of Pakistan (NBP), Habib Bank (HBL), United Bank (UBL), Allied Bank (ABL) and Bank Alfalah (BAFL) on August 30, 2008 to arrange Rs 15 billion term finance facility for National Transmission and Dispatch Company (NTDC) for immediate release to the overdue payables of independent power producers(IPPs) and fuel suppliers.
As per mandate, the term finance facility must be GoP guaranteed. However, in view of the pressing funding requirements of Pepco, the consortium was requested to arrange immediate disbursements on September 1, 2008 on the basis of a 'Letter of Comfort' issued by Ministry of Finance that also confirms the issuance of the GoP guarantee within one month, sources added. They said that the consortium has already requested SBP for permission to disburse the amount on the basis of such'Letter of Comfort'.
"Such request is under process with SBP. We request you to direct the consortium to immediately disburse the finance amount while the documents/permissions are processed," sources quoted Pepco as having written to SBP Governor.
They said that the remaining Rs 15 billion GoP-guaranteed finance facility is being negotiated with a Standard Chartered Bank (SCB)-led consortium and the government hopes that it will be arranged shortly with the help of SBP.
In addition to the above, Askari Bank had been mandated to raise TFCs for Rs 15 billion on April 30, 2008. The SLR eligibility and GoP guarantee to support the transaction was also provided to Askari Bank subsequently. However, the bank has been able to arrange disbursement of only Rs 10.5 billion so far.
Pepco had requested Askari Bank for disbursement of remaining amount of Rs 4.5 billion but so far Pepco has not received any response from the bank, sources added, quoting Pepco's letter written on September 1, 2008. According to sources, Pepco is of the view that any further delays in disbursement could have consequential impact on current power crisis facing the country in terms of disconnection by IPPs and oil and gas suppliers due to non payment.
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