Two RLNG-fired power plants: Minister convenes meeting of body on NPPMCL today

ISLAMABAD: Minister for Power Khurram Dastgir Khan convened a meeting of Committee on Debt Recapitalization of National Power Parks Management Company Limited (NPPMCL) on Thursday (today) aimed at resolving issues of two RLNG-fired power plants, well informed sources told Business Recorder.

The Cabinet Committee on Privatisation (CCoP), in its meeting held on June 24, 2022 constituted a committee comprising Power Minister, (Chairman), Chairman Privatisation Commission (member), Secretary Power Division (member) Secretary Petroleum (member) Secretary Privatisation (member), Additional Secretary Finance (IGF), Finance Division (member) and CEO, NPPMCL.

The Committee will discuss four issues i.e. amendments in Implementation Agreement (IA), by PPIB, amendment in Gas Supply Agreement (GSA) by SNGPL, receivables of about Rs 200 billion to be brought down to industry norms by CPPA-G/Finance Division and resolution of Pakistan Development Fund Limited (PDFL) loan.

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, stated that the 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.

On April 21, 2022 they 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 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 extend the validity period of 90 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 had 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 issues 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.

NPPMCL maintains that the critical fiscal situation is creating hardships for it 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