According to the Ministry of Water and Power pursuant to the proposal of the ECC on May 15, 2012, TFC investor agreement for Rs 82 billion was executed between PHPL and Oil and Gas Development Company Limited (OGDCL) for the purposes of funding repayment liabilities of Discos on the terms and conditions approved by the Finance Division.
The major terms and conditions of Rs 82 billion financing were as follows: (i) disbursement date - September 10, 2012; (ii) up to seven years inclusive of grace period of 36 months from the first disbursement date with grace period applicable to principal repayments only; (iii) pricing - 3 months Kibor (base rate) + 1.00 per cent per annum( spread); (iv) installment payment - Markup- payment; Markup to be services on semi-annual basis , principal payment- in 8 equal semi-annual installments after completion of grace period.
Ministry of Water and Power apprised that the grace period of 36 months of Rs 82 billion term finance facility has been completed and payment of semi-annual installments on account of principal portion amounting to Rs 10.250 billion has become payable semi-annually. Due to limited available fiscal space and liquidity, power sector does not have the capacity to pay principal installments. Ministry of Water and Power and Ministry of Finance are working on a settlement plan for PHPL financing facilities.
According to the Ministry of Water and Power PHPL is a public sector company without assets and will be responsible for restructuring facility of Rs 82 billion by extending tenor of facility from seven years to ten years including extension in grace period of the facility from three years to six years. Pursuance to the proposed arrangement, principal installment payments shall be deferred till March 10, 2019. After detailed discussion, the ECC approved the proposal regarding extension in tenor and grace period from 7 years to 10 years, including extension in grace period from 3 years to 6 years in respect of TFC facility of Rs 82 billion for PHPL with the direction that the words "consortium of banks" may be replaced with OGDCL.
Ministry of Water and Power, in its summary claimed that the power sector has shown marked improvement in its performance in the past two years. The recoveries which remained in the range of 88-89 percent, have now crossed 93 percent consecutively in 2015 and 2016, the highest in the history of the sector. Similarly, the T&D losses which were around 19 percent in 2014 came down to 17.8 percent in December 2016. These two accounts by themselves have provided positive cash flows to the power sector totaling Rs 116 billion in the past two years. Gencos, making a cumulative loss of Rs 7.785 billion in 2013-14, not only overcame their losses but reported a profit of Rs 5.772 billion in 2015-16.
All these achievements as well as historic drop in oil prices helped to keep the power sector''s circular debt within the range of 320-330 billion from December 2014 till June, 2016. These two years (2014-15 and 201 5-1 6) were the only fiscal years in the past more than a decade when no losses of the power sector were paid out of the federal budget which used to be on the average of Rs 200 billion annually in the past. This brought down power sector''s burden on national budget from 2.4 percent of GDP in 2012-13 to around 0.7 percent of the GDP in 2014-1 5, (only subsidy allocations).
The other stream of cash flow into the power sector are the subsidies payments out of federal budget, which are announced by the government from time to time, with the aim of providing relief to low income groups, less developed regions and to allow competitive cost of production to industries and agriculture. A large part of subsidies payment is also reduced through imposition of Tariff Rationalization Surcharge (TRS) on high end consumers. A reconciliation process is going on between the Ministry of Water and Power and the Ministry of Finance over some subsidy claims and arrears which are expected to be settled in the coming months.
Copyright Business Recorder, 2017