The Economic Affairs Division (EAD) has finalised 131 agreements with different international financial institutions and foreign governments for transferring of Wapda loans to the newly-created decentralised entities, official sources told Business Recorder.
These include Subsidiary Loan Assumption Agreement (SLAAs), Loan Assumption Agreements (LAAs), and Loan Guarantee Agreements (LGAs). However, the World Bank (WB), which is one of the major lenders of water and power sector projects, has refused to sign the agreements on the format prepared by the EAD, saying that the Bank would only sign the pacts on its own format, they added.
Sources said that Wapda had so far submitted 243 agreements, including SLAAs, LAAs and LGAs to the EAD, of which 131 agreements have been signed by the Government of Pakistan (GoP), and sent back to the utility whereas the remaining 112 agreements are in the process for the signature of the EAD secretary.
They said that Wapda informed the EAD at a recent meeting that a draft has been prepared for the 20 UBS loans pending with the companies, which would be handed over to the EAD for vetting by the Debt Management Wing of the EAD and the law ministry.
"The EAD had forwarded one LAA and one LGA to the World Bank for signature by their authorised representative, but the Bank did not send back it to the GoP and rather said they want the agreements on their format," the sources added.
Sources also said the EAD additional secretary is expected to convene a meeting shortly to be attended by World Bank Sector Specialist (Power) Rashid and Pepco Executive Director (Finance) Chaudhary Abdul Qadeer to finalise the format and draft of LAAs and LGAs.
Sources quoted the EAD additional secretary as saying at the meeting that transferring of Wapda loans is now near to completion and noted that it was a tremendous task to get the lender's consent and then unbundle the loans of Wapda and transfer them to the newly-created entities.
"This was not only time consuming, but also nerve-wracking, as it involved many stakeholders who had to be convinced to agree on certain modalities," the sources maintained.
They also said all the stakeholders within the government and outside had their own limitations and viewpoints and they had posed various questions on the modalities of transferring of loans.
Sources said the Privatisation Commission (PC) had expressed displeasure over the slow working of the EAD in seeking lenders consent for transfer of loans from Wapda to the companies and even recommended to the government that all the relent and GoP guaranteed loans of power companies should be converted into equity to make them feasible for privatisation.
"The current debt to equity ratio of respective Discos, Gencos, and NTDC as per the balance-sheets as such that neither prudent financial institutions would venture to finance such entities nor prospective investors would be interested to buy them, including Fesco and JPC, which is in advance stage of privatisation," the sources quoted the Privatisation Commission as saying earlier in one of its summaries to the Economic Co-ordination Committee (ECC) of the Cabinet.
The ECC had converted Discos small loans of Rs 3.988 billion into equity few months ago, even then the Privatisation Commission is of the view that the assumption of small foreign relent loans was not enough to prepare them for privatisation, the sources maintained.
Sources said the Privatisation Commission had also suggested that the restructured power sector entities would not be able to attract investors until their all loans are not converted into equity where adequate deferred credit are not physically available with the Discos.
They said the ECC converted Rs 3.988 billion into equity was taken after the EAD failed to obtain consent from the lenders except Belgium, France, and Kuwait.
It is pertinent to note that upon restructuring and unbundling of Wapda, a number of foreign loans relent by the Government of Pakistan to the utility have been allocated to various successor companies on the principle of liabilities to follow the assets.