ISLAMABAD: M/s Hub Power Company (Hubco) has reportedly accused Central Power Purchasing Agency Guaranteed (CPPA-G), the market operator and an arm of the Power Division, of being unfair with respect to payment of overdue receivables.
This impression was conveyed by Chief Executive Officer (CEO), Hubco, Kamran Kamal, in a letter to Secretary Power, Rashid Mahmood Langrial, a copy of which has also been sent to CEO, CPPA-G.
He referred to Hubco’s letters dated May 18, 2022 and June 10, 2022 wherein the company had highlighted the disparity in payments to it and subsequent meetings with Secretary Power and CPPA-G officials, where the company was assured that the issue of disparity would be addressed in Q1 CFY 2022-23.
According to the CEO Hubco, some additional payments were subsequently made to the company, and currently Hubco’s invoices are seven months overdue, which is significantly higher than other similar IPPs.
The power company has claimed that its total overdue receivables stood at Rs 52.6 billion, of which the volume of Capacity Purchase Price (CPP) was Rs 16.652 billion, Energy Purchase Price (EPP) Rs 19.104 billion, and Late Payment Interest (LPI), Rs 16.133 billion.
Hubco is already facing significant liquidity challenges due to its increasing overdue receivables and additional cash flow requirement for its expansion projects and the situation is further exacerbated due to this disparity in payments by the CPPA-G, CEO added.
Kamran Kamal, in his letter, also stated that the power company is the first IPP which has participated in the country’s generation capacity expansion by undertaking four growth projects worth more than $ 4 billion, which are included in CPEC. One of the China Power Hub Generation Company of 1,320 MW achieved Commercial Operation Date (COD) in 2019 and is supplying 9 billion units of uninterrupted and very economical power to meet the needs of more than 4 million households. One other project, Thar Energy Limited, a 330 MW indigenous coal-fired power plant is going through commissioning and is expected to declare COD later this month following by COD of another project of 330 MW Thal Nova (Pvt) Limited. Recently, Hubco has also entered into an agreement to acquire the ENI operations of Pakistan.
The CEO of the company maintained that in this situation, Hubco expects to be treated fairly, at least at par with other IPPs, adding that a half of the first quarter Q1 FY 2022-23 has already lapsed, and the company reminds Secretary Power Division to keep to the commitment made to the company in the meeting in June 2022 that disparity would be addressed by the end of the quarter.
The company has sought intervention and instructions by Secretary Power so that the disparity is addressed by the end of September 2022.
CEO Hubco, in his letter, has further argued that an industry-wide FIFO in CPPA-G’s payment system is implemented to achieve fairness and transparency, which would entail the invoices of all IPPs are sorted sequentially according to their due dates and are paid in the order of their due dates ensuring that the oldest invoices in CPPA-G system are paid first, irrespective of which IPP it relates to. This concern over disparity among IPPs will automatically be resolved.
“All IPPs have working capital facilities to manage their liquidity, however, due to uncertainty of payment from CPPA-G, they continue to face liquidity challenges. The industry-wise FIFO would also provide certainty of cash flows as a result of which the IPPs would be able to better plan future operations, fuel procurement and lenders payments and manage their liquidity by efficiently utilizing their working capital facilities,” CEO Hubco said adding that it would result in considerable time saving for the government and CPPA-G officials which can be more productively utilized.
Copyright Business Recorder, 2022