ISLAMABAD: China Power Hub Generation Company (Private) Limited (CPHGC) has approached Secretary to Prime Minister for resolution of issues of overdue receivables, revolving account and tariff adjustment/true-up.
CPHGC is a 2X660MW (1320MW) coal based IPP established under the China Pakistan Economic Corridor (CPEC), located at Hub, Balochistan. The project achieved its Commercial Operations Date (COD) on August 17, 2019.
The company is currently going through very critical circumstances, of which overdue receivables is the most serious.
The company’s Ren Le Hui, in his letter to Secretary to Prime Minister, stated that the company had been requesting CPPA-G / GoP time and again to immediately release sufficient funds to fulfil its financial and contractual obligations but it seems that the relevant authorities have not taken into consideration this earnest plea. Company has the immediate cash requirement of Rs 31 billion to meet monthly coal requirement however in the month of May, 2022, CPPA-G has allocated Rs 4.80 billion only (till May 27, 2022) wherein creating a substantial shortfall of funds.
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“The outstanding receivables position has still not improved and till May 27, 2022, the outstanding receivables of CPHGC stand at a whopping Rs 81.587 billion out of which Rs 62.268 billion is overdue and this overdue balance does not include a significant amount of billing which is currently pending due to the delay in the decision of the one-time tariff adjustments at COD by NEPRA,” he added.
The company contends that at the same time, due to constraints of generation from other IPPs, CPHGC has received dispatch order of around 95% load factor in year 2022 till April 30. As of April 30, 2022, CPHGC has generated 3,388 GWH Gross, which is 24% more than the generation from CPHGC for the same period in year 2021. Additionally, this generation is already 48% of total generation in the year 2021.
The very high load factor has also resulted in quick depletion of coal stock but the company has not been provided with corresponding funds to make up for its coal stocks accordingly. According to the company, another key issue is revolving account. Despite challenges and struggles faced by the Company due to Covid-19 pandemic, the company has made extra efforts to continuously provide uninterrupted and smooth supply of electricity to the national grid, it further stated.
“The company is currently in a dire situation as it is facing breach of financing agreements with the lenders due to Government of Pakistan (GoP) not fulfilling its commitment to establish the revolving account,” CEO said, adding that in this context, letters were also sent to Federal Minister (Ministry of Energy), Chairman of Federal Cabinet Committee for Energy and other relevant authorities, wherein the essence of the issue was highlighted.
The company’s CEO also held separate meetings with authorities to brief them about the issue of non-compliance of revolving account agreement. Earlier this year, in the month of February, CFO of CPPAG conducted a combined meeting with all CPEC IPPs and was assured by the establishment of a revolving account, however, more than three months have passed since that meeting but neither the revolving account has been established nor “we have received any update in this regard,” he further contended.
The CEO maintained that non-establishment of revolving account is a violation of the revolving account agreement between CPHGC and CPPA-G and also a contractual default under the financing agreements signed between the company and a consortium of Chinese lenders.
Copyright Business Recorder, 2022