Debt-recapitalisation of NPPMCL plants: PC tries to persuade MoE to materialise bank deals

ISLAMABAD: Privatisation Commission (PC) is reportedly is trying to persuade the “non-cooperative” Ministry of Energy (Petroleum & Power Divisions) to materialize “deals” with banks for debt-recapitalization of two RLNG-fired power plants of National Power Parks Management Company Limited (NPPMCL), well informed sources told Business Recorder.

On June 8, 2022, Privatisation Commission had warned Petroleum Division that debt recapitalization and re-financing of RLNG-fired power plants owned by NPPMCL, i.e., Haveli Bahadur Shah and Balloki power plant will be affected, if issues related to guaranteed gas supply are not sorted out immediately,

On June 20, 2022, Secretary Privatisation Division, Dr Iram A Khan, in a letter to both Secretary Petroleum and Secretary Power, has stated that the Cabinet Committee on Privatisation (CCOP) in its meeting on December 31, 2021 approved the debt-recapitalization of NPPMCL on the following lines: (i) NPPMCL shall initiate debt re-capitalization and refinancing process as per Companies Act, 2017; and (ii) all GoP stakeholders including PC, PPIB, PDFL and DG (Debt) Finance Division to jointly support the NPPMCL to implement and execute the process of debt re-capitalization and re-financing from local banks.

According to Secretary, Privatisation Division, debt re-capitalization of NPPMCL is at an advanced stage. Local banks/ consortiums are keen to replace the existing loan/ equity of Pakistan Development Fund Limited (PDFL) into a commercial debt.

Petroleum Div asked to sort out guaranteed gas supply issues

On April 21, 2022 they have submitted bids amounting to Rs. 102 billion. Further banks have also shared draft term sheet which is being finalized by the procuring agency, i.e., NPPMCL in consultation with GoP stakeholders. Finalization of term sheet would also require completion of some critical Condition Precedents (CPs) before approval by the Private Power Infrastructure Bard (PPIB).

The bid validity period has expired on June 18, 2022 due to non-completion of various critical CPs by the GoP stakeholders. Some key CPs pertain to Power & Petroleum Divisions, that have been communicated earlier by PC, in its letter dated June 08, 2022 for necessary action.

In the meantime, NPPMCL has requested the interested banks/ consortiums to extend the validity period of ninety days. Some banks have responded positively by accepting the request of NPPMCL. The sources said, PC, and Ministry of Energy have agreed to sort out issues which are hindering debt-recapitalization so that banks be given assurance in this regard to avoid further delays.

PC has sought intervention from Petroleum Division on the following for early resolution before the critical deadline: (i) NPPMCL currently faces an Event of Default (EoD) amounting to Rs113 billion with respect to furnishing of requisite gas supply deposit per terms of the GSA. Banks anticipate a risk that SNGPL could discontinue supply of gas to NPPMCL in future (hard condition precedent for bank financing);(ii) during the negotiations on term sheets, the banks have demanded amendment in GSA to the effect of the reduction in gas security deposits based on existing 9 billing cycles to 3 billing cycles; and (iii) a Letter of Comfort (LoC) from Petroleum Division that the supply of gas will not be discontinued by SNGPL may be provided to NPPMCL so that lending banks can be persuaded to reconsider this EoD. According to PC, non-resolution of existing issue may hinder the debt recapitalization process for NPPMCL. The matter regarding amendment in the Implementation Agreement (lA) regarding “lenders financial closing” is under deliberation at PPIB’s end.

Meanwhile, NPPMCL has said that its receivables are gradually pilling up and has reached Rs 190 billion out of which Rs 160 billion are overdue.

According to the company, the critical situation is creating hardships for NPPMCL to settle its contractual liabilities like payment to SNGPL, insurance company, payment of mark-up on working capital facilities, payments to Long Term Service Agreement (LTSA) and O&M contractors fee, etc.

Copyright Business Recorder, 2022