The management of K-Electric has reportedly agreed to negotiate new Power Purchase Agreement (PPA) with Central Power Purchasing Agency (CPPA) to obtain electricity from the national pool and a Gas Supply Agreement (GSA) with Sui Southern Gas Company Limited (SSGCL), well informed sources told Business Recorder. This agreement was reached at a meeting held under the chairmanship of Secretary Water and Power, Younas Dagha and attended by representatives of other Ministries and a team of KE management.
According to sources, the committee also decided that Finance Ministry, K-Electric, National Transmission and Despatch Company (NTDC), Sindh government and Sui Southern Gas Company Limited should reconcile figures of receivables and payables amounting to more than Rs 200 billion within two weeks.
"As all stakeholders reconcile the figures of their payables and receivables are reconciled with Later Payment Surcharge (LPS) and without LPM, they will bring the reconciled figures to the committee which will hold the next meeting on September 7, 2015," the sources continued. The committee will decide payment mechanism and payment duration in consent with the stakeholders. SSGC management argued that a comprehensive payment plan needs to be agreed to ensure recovery of overdue balance of Rs 58 billion. "The government is making all out efforts to resolve issue of payables and receivables because its departments like NTDC and SSGC will get long overdue amounts," the sources further added.
It has also been decided that KE and provincial government pay current bills to avoid piling up circular debt which has choked the entire energy sector. Responding to a question on the future of 650 MW electricity that continues to supplied to KE from national pool without any agreement for the last seven months, NTDC officials revealed that they have prepared a draft of new PPA which is being shared with KE. The new draft PPA will also be finalised prior to next meeting of the committee.
The long overdue Gas Sale Agreement (GSA) between SSGC and KE also came under discussion. The committee also decided that both the companies should sit together and ink the agreement so that entire system is run under a legal framework. SSGC is supplying gas to KE with GSA of only 10 mmcfd. All efforts made by SSGC to enter into GSA with KE have failed due to various reasons. KE is currently the largest customer of SSGC and also the largest defaulter to the tune of Rs 58.333 billion as on June 30, 2015. KE started defaulting on its payment from 2008 - soon after its takeover by Abraaj Group.
Several payment plans have been executed for payment of outstanding dues. However, KE has failed to honour its commitment and outstanding balances continue to increase. KE accrued LPS in respect of SSGC overdue balances till June 30, 2010. Thereafter it discontinued acknowledging LPS and started accruing on net basis. KE non-accrual of LPS has been pursued by SSGC with SECP also.
SSGC maintains that there is an urgent need to finalise a comprehensive GSA considering the gas availability constraint which should include programme for an early recovery of outstanding amount. When contacted, a spokesman for Water and Power Ministry said "It was a technical level working group like meeting and final decisions are to be made on their working".
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