[h=1]UPDATE NEWS: IPPs give 72-hour ultimatum[/h]
LAHORE - The advisory council of independent power producers (IPPs) has issued an ultimatum of 72 hours to the government for the non-payment of Rs 34 billion, failing which the IPPs legal counsel will proceed with legal options. The ultimatum was issued after the failure of government to honor its sovereign commitment. Moreover, eight IPPs served another fresh notice for payment of Rs 9 billion to the government. Sources said the government must act positively to avoid any embarrassment in court of law, as the industry was facing a hard time with severe cash crunch, especially when banks had stopped further loans. However, in the larger national interest, the IPPs are continuing to run their plants on the basis of fuel payment they got from NTDC for a few hours. The sources revealed that despite this huge default, the IPPs were generating power per their commitment based on funds they were given for fuel, but the situation was getting worse day by day.
The IPPs would soon start to default on their loans, both short-term and project loans from the banks, which would cause another of Pakistani industry (banks) to collapse. The sources said since the deadline of the final 10-day notice of Rs 34 billion payment ended on May 4, 2012, which was served by the same eight IPPs on April 19, it had become evident that soon the IPPs would have all their investment jeopardized by the government’s indifference towards financial woes of these power producers. They said a case outside Pakistan against this sovereign default would immediately result in severe reactions by the global financial sectors. The banks, they added, would stop honouring trade documents from Pakistani banks and would insist on cash payments.
PERSONAL NOTE: I have mentioned in the past that I expect the Commercial Banks in Pakistan to collapse. I was thinking that it would be triggered by Govt bonds loosing values, hence erasing bank capital. I missed this situation. I am honestly starting to feel that the Greek default will come after Pakistan's default.
Saif Power, Liberty Tech, Nishat Power, Nishat Chunian Power, Oriental Power, Saphire Power, Halmore Power and Atlas Power have all presented notices to the Government for payment of their dues. – File photo
http://dawn.com/2012/05/04/govt-may-face-default-on-ipps-dues/
LAHORE: The government is on the edge of sovereign default unless it pays by Friday (today) evening eight independent power producers (IPPs) their dues of Rs34 billion on account of electricity purchased from them in October and November last year.
“We would be forced to shut down our plants and stop producing electricity if the payment of our outstanding dues is not made by tomorrow evening,” the CEO of one of the IPPs told Dawn on Thursday on condition of anonymity.
The eight IPPS that have invoked sovereign guarantee together produce 1,700 megawatts of electricity. “The closure of the plants and non-compliance of the contractual obligations by the government will also lead the IPPs to default on their quarterly payments on their bank loans,” he said.
In all, the government owes a sum of Rs59bn against electricity purchased from the eight IPPs since October last.
“The delay in payment of our dues will jeopardise our investment of Rs200 billion. We are no longer able to purchase fuel and pay back our project loans of $1.6 billion to the banks because of the government’s default on our dues,” a senior executive of another IPP said while talking to this reporter.
”It is simply not possible to run power plants without finance, but the government is not paying any heed to this issue that will worsen the power crisis in the country,” he said.
He said the government had called them for meetings in Islamabad a week ago to ask them to withdraw their notices instead of paying their dues.
He said the power producers would operate only if and when the government pays them their electricity price.
He said the IPPs — Saif Power, Liberty Tech, Nishat Power, Nishat Chunian Power, Oriental Power, Saphire Power, Halmore Power and Atlas Power — were forced to put the government on notice in accordance with their contracts because Pepco, the power purchaser, had failed to clear its dues within the agreed period for power supplied to it by them.
“As the government is the sovereign guarantor, the IPPs after exhausting all legal avenues, including serving notices to Pepco, invoked the guarantee,” he said.
PERSONAL NOTE: See that $1.6 billion.. Thats in DOLLARS. Govt cannot print it. Check out the M2 Statement from State Bank. See that negative -244,804? I was warning then that your commercial banks are gonna get hammered. I wont go into too much detail but do not keep too much money in commercial banks. Do not hold alot of Rupee cash.
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