ISLAMABAD: Privatisation Commission (PC) has reportedly warned Petroleum Division that debt recapitalization and re-financing of RLNG-fired power plants owned by National Power Parks Management Company Limited (NPPMCL), i.e., Haveli Bahadur Shah and Balloki power plant will be affected if issues related to guaranteed gas supply are not sorted out immediately, well informed sources told Business Recorder.

The warning issued by Director-General (Power) PC Iftikhar Naqvi to all the concerned stakeholders, including Chairman Privatisation Commission and Secretary Privatisation Commission noted that debt recapitalization and refinancing process of NPPMCL is at an advanced stage.

Bids validity period in relation to debt recapitalization and refinancing process of NPPMCL shall expire on June 18, 2022. Conditions on precedents with respect to project financing required by banks have to be completed within the stipulated timeframe. Delay in resolution of these issues may cause delay in the process.

According to sources, PC has sought intervention from Petroleum Division on the following for early resolution before the critical deadline:

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(i) NPPMCL currently faces an Event of Default (EoD) amounting Rs 113 billion with respect to furnishing of requisite Gas Supply Deposit per terms of the GSA. Banks anticipate a risk that SNCPL could discontinue supply of gas to NPPMCL in future - a hard condition precedent for bank financing;(ii) during the negotiations on term sheets, the banks have demanded amendment in GSA to the effect of the reduction in Gas Security Deposits based on existing 9 billing cycles to 3 billing cycles; and (iii) a Letter of Comfort (LoC) from Petroleum Division that the supply of gas will not be discontinued by SNGPL, so that lending banks can be persuaded to reconsider this EoD.

According to PC, non-resolution of existing issue may hinder the debt recapitalization process for NPPMCL. The matter regarding amendment in the Implementation Agreement (lA) regarding “lenders financial closing” is under deliberation at PPIB’s end.

Recently, Government of Pakistan approved the “debt recapitalization and refinancing of NPPMCL” through competitive process to raise long-term debt up to Rs 110 billion. Accordingly, upon direction of Privatisation Commission, NPPMCL invited proposals/ bids from banks/ financial institutions on the basis of “Request for Proposal (RFP) provided by the Privatisation Commission.

As per provisions of the RFP, security/collateral for the long-term loan would be as per the IA and Power Purchase Agreements (PPA) of the power projects, i.e., mortgage/ charge over fixed assets of the company, assignment over capacity receivables and pledge of company’s shares in favour of the banks/ financial institutions. Accordingly, the banks have requested NPPMCL, to approach its shareholders for arrangement of necessary internal approvals for signing of share pledge agreements with the banks/ financial institutions for the said transaction.

The source said, 249,999,997 shares of the Company already stand issued in the name of President of Pakistan against the Seed Money injected by the Government of Pakistan.

Privatisation Commission has requested that approval of the Federal Government for signing of Share Pledge Agreements (SPAs) with the banks/ financial institutions be arranged with respect to the shares held in the name of the President of Pakistan along with authorization of any suitable officer of the Power Division to sign it.

Meanwhile, NPPMCL has said that its receivables are gradually piling up and reached Rs 190 billion out of which Rs 160 billion are overdue.

According to the company, the critical situation is creating hardships for NPPMCL to settle its contractual liabilities like payment to SNGPL, insurance company, payment of markup on working capital facilities, payments to Long Term Service Agreement (LTSA) and O&M contractors’ fee, etc.

NPPMCL has time and again requested CPPA-G to release funds from energy receivables of the company to settle outstanding RLNG bills of SNGPL.

Copyright Business Recorder, 2022