Power plants: Delay in clearance of Rs55bn dues jeopardises operations: SECMC

KARACHI: The delay in clearing the outstanding balance of Rs 55 billion by power plants to Sindh Engro Coal Mining Company Limited (SECMC) has cast a shadow over the company’s mine operations, causing severe cash flow issues, according to SECMC.

“If the mine operations halt, the government will have to import the coal worth $50 million every month.”

In a letter to the Secretary Energy Department Govt. of Sindh, the Chief Executive Officer (CEO) SECMC Amir Iqbal has sought his immediate intervention to take it up with the relevant federal Finance and Energy Ministries in prioritizing the release of payments pertaining to SECMC.

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Timely disbursement is paramount for sustaining our operations, ensuring continued contribution to Pakistan’s energy needs, and advancing the use of indigenous coal in line with the national goal of energy security and conservation of precious foreign exchange reserves.

It said the delay in clearing the outstanding balance has become a critical issue faced by Sindh Engro Coal Mining Company Limited (“SECMC”), a joint venture between the Government of Sindh, Engro Energy Limited, and affiliates. SECMC, pivotal in addressing Pakistan’s power sector challenges, currently provides 7.6 million tons per annum (“MTPA”) of indigenous Thar Coal to three coal power plants, significantly contributing to affordable electricity generation.

Since July 2019, SECMC has supplied coal, resulting in approximately 22,600 GWH of Electricity. Notably, the indigenous coal power plants are recognized for producing the most cost-effective energy, as confirmed by the Merit Order List from the National Transmission and Dispatch Company (NTDC).

Despite its significance to the nation, SECMC is grappling with a pressing issue. The circular debt in the energy sector has led to outstanding receivables of approximately PKR 55 billion (excluding Delayed Payment Interest Invoices) with Independent Power Producers (IPPs) through the Central Power Purchasing Agency (“CPPA”), the letter said.

This has resulted in severe cash flow challenges, impacting essential operations such as payments to O&M contractors, royalty to the Government of Sindh, and procurement of crucial fuel, spares and equipment.

The repercussions of delayed payments extend beyond SECMC, posing a risk to Pakistan’s energy security. In the absence of SECMC if there is a potential shift to imported fuel for power generation, it will incur an estimated monthly cost of USD 50 Million (based on average international coal prices).

Additionally, SECMC’s expansion plan is to increase mine capacity from 7.6 MTPA to 11.2 MTPA, serving Lucky Electric Power Company Limited (“LEPCL”), aim to alleviate the foreign exchange burden currently incurred by LEPCL through the import of coal, which is currently importing coal of USD 20 million.

Copyright Business Recorder, 2023