Govt to clear first tranche to selected IPPs soon

May 05, 2021 (MLN): Just hours after the Information Minister’s press conference yesterday where he announced the government’s decision to soon pay 40% of the dues to Independent Power Projects (IPP), the Prime Minister's Office clarified on Tuesday evening that the cabinet had only approved the committee to resolve the issues and arrears of IPPs.

A press release issued by PMO said that the federal cabinet had approved the decisions of the Economic Co-ordination Committee (ECC), including the formation of a committee to look into the delays of the said payments.

The ECC, today, is expected to take up the decision of payment to IPPs once again. In light of the Information Minister’s announcement, the prospects of a resolution of the matter are surely better, said Deputy Head of Research, Amreen Soolani at JS Global.

To note, International Monetary Fund (IMF) has set a new structural benchmark (SB) for government to pay up to Rs180bn to power producers by the end May-2021.

News reports suggest the government has decided to soon pay Rs90bn to IPPs that fall under the 1994 Policy (and before) under the first payment while the reported Rs60bn payment to IPPs under the 2002 Policy may take time.

Earlier, it had been decided that the dues would be cleared in two tranches. The first tranche would settle 40% of the outstanding dues through a 33.33% cash payment and the remaining 66.67% to be cleared through floating PIBs and Sukuks, Soorani said.

The second tranche would clear the remaining 60% under a similar payment mode after six months.

With regards to post payments to IPPs, the early termination is also reportedly being discussed by the government where IPPs under the 2002 Policy with higher efficiencies are also in the list. With 11 IPPs of cumulative 3,400MW being reported to be offered a collective Rs150bn, it remains to be seen whether IPPs would accept this offer or not, she added.

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