Ministry says Wapda on the verge of default

Ministry of Water Resources has claimed that Water and Power Development Authority (Wapda) is on the verge of default to banks due to non-payment of over Rs 200 billion receivables by Central Power Purchasing Agency -Guaranteed (CPPA-G), well informed sources told Business Recorder.

The country's circular debt has already touched a new peak of Rs 1.7 trillion due to continuous dismal performance of power sector and targets agreed with the IMF and other International Financial Institutions despite continuous upward revision in consumer end tariff. According to the IMF, the energy sector's circular debt is a burden on the state and a big source of uncertainty.

The government claims that it will bring down the actual circular debt to Rs 75 billion by 2023 as its growth has already declined from Rs 35 billion to Rs 12 billion per month. However, no plan is in hand so far to pay off the loans booked in the accounts of PHPL on behalf of power Distribution Companies (Discos) on which interest is being paid by the consumers.

CPPA-G purchases electricity from the producers' i.e. public including Wapda and private sector and sells it to the Distribution Companies.

CPPA-G clears the outstanding arrears of private power generation companies on preference but ignores public sector generation companies including Wapda.

The sources said CCPA-G owes over Rs 200 billion receivables against hydel power due to which its development projects are moving at a slow pace.

In this regard, Ministry of Water has written four letters on June 10, 2019, August 01, 2019, September 20, 2019 and November 14, 2019.

The sources said, this matter has also been taken up officially by Wapda itself and through personal persuasion in view of its importance in regard to uninterrupted implementation of the hydel projects and timely settlement of loans arranged from various banks.

According to sources, CPPA-G has made payments far less than the actual cost of electricity provided by Wapda. As a result, the outstanding is persistently piling up which has now reached an extent where Wapda may default on its debt obligations to banks besides scaling down its projects and compromising on O&M of the hydel power stations if the much needed funds are not released on war footing. The predicament has been explained in its recent letter of October 29, 2019. CPPA-G now owes Rs 211.29 billion to Wapda.

Secretary Ministry of Water Resources, Muhammad Ashraf, maintains that Wapda is financially severely constrained as it has to pay off Net Hydel Profit (NHP) payments to Punjab and Khyber Pakhtunkhwa (KP) to the tune of Rs 105.152 billion and Rs 38.12 billion due at the end of next month.

Wapda has stated that these payments would not be possible, conveyed by the legal counsel for Habib Bank Limited (HBL), and it has to be settled as bullet payment on December 28, 2019. "Non-payment would trigger an event of default, exposing other GoP guaranteed commercial facilities of Wapda for recall by financial institutions with potentially catastrophic consequences," the sources said, adding that Secretary Power Division has sought help of Secretary Power to look into the matter personally and directed CPPA-G to release an amount of Rs 38.12 billion to Wapda on top priority to pay off NHP loan due on December 28, 2019. He has also requested Secretary Power to instruct CPPA-G to clear outstanding receivables toward Wapda at the earliest.