NJHPP may default if PPA not signed by CPPA-G

The Neelum Jhelum Hydropower Company (NJHPP) is likely to go into default after December because of the dilly-dallying attitude of Central Power Purchasing Agency Guarantee (CPPA-G) in signing power purchase agreement with NJHPP, said sources.

The NHPP is a Rs 500 billion investment project of Government of Pakistan with the underlying objectives of providing sustainable long-life cheap energy to the national grid. The project was formally inaugurated by the Prime Minister of Pakistan in April-2018. Since then NJHPP has injected over 6160 million units to the national grid.

To save NJHPP from succumbing to financial starvation, sources said NEPRA had given an interim power tariff of Rs 5.9180 per unit of electricity. Also, while considering the tariff below the financial requirements, NJHPP went in to the tariff review request by NEPRA which was also approved and now NJHPP has a duly notified tariff of Rs 9.1184 per unit of electricity in vogue for the electric supply made since July 4th, 2018.

According to sources, a staff level agreement had reached between the top tier management of Central Power Purchasing Agency Guarantee (CPPA-G) and NJHPP this year in July 2019 yet CPPA-A is not signing Power Purchase Agreement with NJHPP. Till to date approximate loss to the government from this unreasonable move of CPPA-G amounts to Rs 56 billion. The amount is understood to have been recovered from consumers by Discos but adjusted in circular debt to show efficiency and performance instead of payment to NJHPP. When this liability to NJHPP shall be accounted for by CPPA-G then there shall be a sudden rise in the circular debt.

It may be noted that NJHPP never reached a financial close, therefore could not service its contractual obligations towards foreign as well as local funding institutions. Resultantly government had to bear the payments of approximately Rs 89 billion from the exchequer of Government of Pakistan.

Meanwhile, sources said the local banks sponsored sukuk arrangement of Rs100 billion had been serviced from WAPDA funds until now however there is likelihood that after December NJHPP would go into default with NBP led consortium and hence sovereign guarantee of government of Pakistan may be called by the Banking consortium but in any case the expected scenario shall be highly embarrassing for the Government of Pakistan only due to CPPA-G.

When contacted, Chief Executive Officer CPPA-G Abid Latif Lodhi said sub-committee of the Board is considering the point whether this tariff would be taken as a block of Wapda or there should be an independent agreement. Once the committee decides, a proposal would be finalised for the Ministry after due approval from the Board. He said legal opinion has also been sought by the Board. Meeting of the Board is likely to take place soon, he added.