A syndicate of seven commercial banks has reportedly refused to extend further loans to the "unsustainable" power sector if overdue principal portion of loans is not cleared prior to seeking a new facility of Rs 40 billion, well informed sources told Business Recorder.
The Economic Coordination Committee (ECC) of the Cabinet on March 7, 2018 approved the proposal of raising fresh funds amounting to Rs 80 billion through syndicated term finance facility for power sector liquidity. The ECC also approved to pay-off the overdue principal till March 2018 amounting to Rs 26.666 billion in respect of existing facilities of: (i) Rs 15.00 billion; (ii) Rs 40.00 billion; and (iii) Rs 25.00 billion respectively by utilizing proceeds from the Rs 80.00 billion finance facility and transfer the remaining funds of Rs 53.333 billion to CPPA-G to discharge its liabilities against power sector entities.
In response to the request to commercial banks regarding conveying their appetite and other terms and conditions in order to execute the fresh financing facility of Rs 80.00 billion, (i) National Bank of Pakistan (NBP), (ii) United Bank Limited (UBL), (iii) Allied Bank Limited (ABL), (iv) Bank Alfalah Limited (BAFL), (v) Bank AI Habib Limited (BAHL), (vi) JS Bank Limited (JSBL) and (vii) Bank of Khyber (BOK) agreed to participate in the facility subject to the condition that Rs 1.011 billion being the overdue principal portion till March 2018 on account of two principal installments in respect of existing term finance facility of Rs 6.069 billion shall also be paid in addition to the (i) existing facilities of Rs 15 billion, (ii) Rs 40.00 billion and (iii) Rs 25 billion otherwise disbursements of relevant portions by the members shall not be made.
The sources said, the syndicate included the clause on payment of Rs 1.011 billion in respect of existing term finance facility of Rs 6.069 billion in the term sheet of Rs 80.00 billion as a condition precedent to the disbursement; and also conveyed to back out from the transaction in case of non-payment mentioned in Finance Division letter of March 09, 2018 and approved the terms and conditions for payment of principal portion of Rs 1.011 billion in respect of Rs 6.069 billion facility in addition to the existing facilities of (i) Rs 15.00 billion (ii) Rs 40.00 billion and (iii) Rs 25.00 billion, which was also subsequently approved by the Board of Directors PHPL in its meeting.
Pursuant to the approval of the ECC, an amount of Rs 26.667 billion was utilized to pay-off the overdue principal amounts till March 2018 in respect of existing facilities of (i) Rs 15.00 billion, (ii) Rs 40.00 Billion and (iii) Rs 25.00 billion and balance of Rs 53.333 billion was transferred to CPPA-G to discharge its liabilities against the power sector entities.
According to sources, in order to pay off the overdue principal portion amounting to Rs 1.011 billion in respect of Rs 6.069 billion facility CPPA-G transferred the funds to PHPL from Rs 53.33 billion (balance transferred to CPPA-G by PHPL out of finance facility of Rs 80.00 billion) for onward payment to Bank Alfalah Limited which was transferred forthwith to the Bank Alfalah Limited towards settlement of its overdue principal portion of Rs 6.069 billion finance facility.
The sources maintained that considering the fact that overdue portion of Rs 1.011 billion paid by CPPA-G to PHPL for onward payment to Bank Alfalah Limited in respect of Rs 6.069 billion finance facility is also the obligation of the power sector entities therefore the Power Division sought ex-post facto approval in order to regularize the matter of payment of Rs 1.011 billion by the CPPA-G.
Further, on April 26, 2018, the ECC directed the Finance Division to make arrangements for provision of Rs 50 billion by next week and remaining Rs 50 billion before May 20, 2018. This amount was to be disbursed as per priority determined by the CPPA-G. The first tranche of Rs 50 billion was disbursed on May 4, 2018. Term Sheet of May 8, 2018 in respect of 2nd tranche of Rs 50.00 billion STFF received from syndicate of banks comprising (i) HBL (ii) UBL, (iii) ABL, (iv) BAFL (v) BAHL, (vi) MBL, (vii) BoP and (viii) SBL has been forwarded to the Finance Division for approval. The terms and conditions of the indicative term sheet of May 8, 2018, in respect of 2nd tranche of Rs 50.00 STFF is exactly in line with recently concluded 1sttranche of Rs 50.00 billion STFF except clause "debit authorities of overdue amount in respect of Rs 40.00 billion STFF, PKR 25.00 billion STFF and the PKR 6.069 billion bilateral facility from BAFL shall be provided prior to first disbursement".
The details of facilities are as follows: (i) Rs 40 billion (NBP led syndicate), payable (Rs 3.334 billion); (ii) Rs 25 billion (NBP led syndicate), payable (Rs 2.084 billion); and (iii) Rs 6.069 billion (bilateral - BAFL), payable (Rs 506 million). Total payables are Rs 5.624 billion.
CPPA-G argues that the adjustment of PHPL overdue principal of Rs 5922 billion cannot be made out of the 2nd tranche of Rs 50.00 billion in the light of ECC decision of April 26, 2018 and has conveyed that they are not in a position to provide the debit authorities to adjust the principal payments out of the proceeds of 2nd tranche of Rs 50.00 billion.
Considering the fact that overdue portion of Rs 5.924 billion is to be paid by power sector to banks being obligation of the power sector entities Power Division sought approval of the ECC to pay Rs 5.924 billion out of the 2nd tranche of Rs 50 billion.
The sources said the ECC in its meeting held on May 24, 2018 approved the proposal of Power Division but no official press release about the decision was released. Joint Secretary (Power Finance) Zargham Eshaq Khan told Business Recorder that the purpose is to pay off principal amount of overdue facilities to get new facility at a lower interest rate. He clarified that the overdue facilities were availed at Kibor + 2 per cent whereas the new facility will be Kibor + 1 per cent.
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