ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved issuance of new sovereign guarantee by Ministry of Finance in respect of fresh Syndicated Term Finance Facility (STFF) for Rs.30.95 billion through Power Holding Limited (PHL) for the purposes of adjustment of existing PHL after the Power Division expressed its inability to pay the loans due to a weak financial position.
Sharing the background, sources said the ECC on July 25, 2017, issued STFF for Rs.30.95 billion executed between Power Holding Limited (PHL) and a consortium of local conventional banks comprising of (i) Allied Bank Limited (ABL), (ii) JS Bank Limited (JSBL) and (iii) The Bank of Khyber (BOK). The objective was to fund the repayment liabilities of the Distribution Companies (Discos) on the terms and conditions duly approved by the Finance Division.
The disbursement proceeds of the facility were utilized by paying the outstanding liabilities of various sectoral entities through Central Power Purchasing Agency (Guarantee) Limited (CPPA-G). The major terms and conditions of existing PHL finance facility of Rs.30.95 billion were as follows; (i) up to 05 years , inclusive of grace period of 24 months from the first disbursement date with grace period applicable to principal repayments only; (ii) 6 month KIBOR (base rate) + 2.00% p.a (spread). However, 1.30% rebate/reduction in spread, in case profit/ mark-up payments are made within 30 days of the due date; (iii) mark-up to be serviced on semi-annual basis; (iv) in 06 equal semi-annual installments after completion of grace period and (v) first demand, irrevocable, unconditional and continuing Government of Pakistan Guarantee for securing the principal, profit payments and/or any other amount(s) becoming due for payment in respect of the facility for the entire tenor of the facility.
On September 9, 2020, Power Division informed the ECC that the grade period of existing PHL finance facility of Rs.30.95 billion was completed and installment payments on account of principal portion had started becoming payable. However, due to limited available fiscal space and liquidity, power sector does not have capacity to pay principal installments in respect of the existing PHL facility of Rs.30.95 billion. Power Division and Finance Division were working on a settlement plan for the PHL finance facilities. All the profit/mark-up payments in respect of the facility are made within grace period of 30 days and rebate of 1.30% had been availed by PHL as a result of timely profit/mark-up payment. Power Division said that Power Holding Limited was a public sector entity without assets and would be responsible for arranging a fresh facility of Rs.30.95 billion for the purposes of adjustment/settlement of the existing PHL finance 'facility of Rs.30.95 billion. Finance Division would provide Government Guarantee for the repayment of principal, profit payments and/or any other amount(s) becoming due for payment in respect of the fresh finance facility for Rs.30.95 billion. The servicing of mark-up, principal repayments and all other amounts becoming due and payable in respect of the fresh facility of Rs.30.95 billion shall be the responsibility of CPPA(G). Pursuant to the arrangement, the principal installment payments shall be deferred for further period of 02 years from the date of execution of fresh facility and disbursement proceeds of the fresh facility will be utilized towards adjusting the outstanding principal portion of existing PHL finance facility of Rs.30.95 billion.
Copyright Business Recorder, 2020
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