Financial obligations: Chinese firm urges CPPA-G to allocate maximum funds

ISLAMABAD: China Power Hub Generation Company (Private) Limited (CPHGCL) has urged CPPA-G to allocate maximum funds to ensure that the company can fulfil its financial obligations.

China Power Hub Generation Company (Private) Limited (CPHGC) is a 2x660 MW coal-fired power plant with a dedicated coal jetty located in Hub, Balochistan.

CPHGC has always supported the vision of government of Pakistan to create an economically viable environment in the power sector by providing reliable energy solutions. In pursuance of this vision, the Project achieved its Commercial Operations Date (COD) on 17 August 2019.

HUBCO says CPHGC’s 2x660MW power plant declared ‘project complete’

Since COD, CPHGC has generated more than 24.78 billion kWh of electricity till date.

With reference to the subject matter captioned above, we would like to highlight again (as the same has already been communicated to GoP/CPPA-G through our various earlier correspondences and meetings) that the Company has to make payment for debt service of PKR 23.90 billion before 5th April, 2023. This payment includes PKR 16.12 billion for principal repayment against long-term loan, PKR6.29 billion for interest payment for long- term loan and PKR 1.49 billion for interest on working capital.

According to the company, such funds requirement pertains to debt service only and does not include the funds requirement on account of coal procurement, CTS charges, O&M fee and insurance which has already been communicated to CPPA-G through a letter of February 17, 2023.

Considering funds requirement of the Company for debt service, CPPA-G has requested to prioritise higher allocation of funds to CPHGC so that the Company can fulfill its financial obligations in a timely manner and avoid default towards its long-term lenders which is not at all desirable by the counter-parts.

But contrary to the funds’ requirement, CPPA-G has merely allocated Rs 2.93 billion to CPHGC till March 10, 2023, against capacity payments which is substantially lower than what is required to fulfill the debt service requirement of the Company. Such lower allocation of funds by CPPA-G has put the Company in a critical situation and an immediate release of funds is requested from the Company’s overdue receivables which can reinforce its dwindling financial position.

Moreover, the company’s Capacity Purchase Price (CPP) receivables have also accumulated to a worrisome high level of Rs 63.85 billion including overdue receivables of Rs 46.07 billion as of March 10, 2023.

CPHGC has requested CPPA-G to allocate maximum funds to ensure that the company can fulfil its financial obligations and provide uninterrupted power supply to the National Grid and avoid contractual defaults thereof. Recently, China’s Charge d’ Affairs met with SAPM on Coordination, Syed Tariq Fatemi and conveyed concerns of Chinese power companies saying that their overdue receivables have reached $ 1.5 billion.

SAPM on Coordination in a letter to Power Minister, a copy of which is available with Business Recorder, referred to his breakfast meeting with Chinese Charge d’ Affaires, in which the latter stated that overdue payments to the Chinese IPPs currently stand at $1.5 billion. This is causing huge concern among Chinese businesses, he added. Chinese Charge d’ Affaires has complained that Chinese power plants at Hub, Sahiwal and Port Qasim are facing currency exchange restrictions, which was causing difficulty in coal import.

Copyright Business Recorder, 2023