The power company's annoyance has been communicated by the Chief Financial Officer, Hubco, Abdul Sattar to the General Manager Wapda Power Privatisation Organisation (WPPO) through a letter, copies of which have also been sent to all the top office holders of power sector.
"We are surprised that a strong legal position has been taken by Chief Engineer National Power Control Centre (NPCC) in the interpretation of Power Purchase Agreement (PPA) which is that the Hub units are shut down due to non-availability of fuel. It would be treated as forced outage and liquidated damages would be imposed on Hubco," the sources quoted the CFO Hubco as saying.
Hubco has also rejected legal interpretation of PPA by Chief Engineer NPCC on the plea that Wapda itself is at default as was already communicated in letters and meetings since the start of circular debt.
Hubco argued that General Manager WPPO is the official custodian of PPA and it is surprising for the company that Chief Engineer NPCC has taken the authority to do the legal interpretation.
The CFO, sources said, has argued that Hubco plant is 100 per cent available and can supply 1200 MW to the national grid. The daily fuel requirement to generate power of 1,200 MW is approximately 7,000 tons per day whereas the current useable fuel stock is 38,000 tons which is only sufficient for about six days of generation.
The company has also claimed that it has persuaded PSO to enhance the fuel supply to 7000 tons per day, however, they have made it very clear that in order to continue supply on a sustainable basis, their overdue amounts including delayed payment invoices must be settled and default of non-establishment of SBLC must also be immediately rectified.
Currently, an amount of Rs 73.08 billion is outstanding payable to Hubco by Wapda out of which Rs 70.17 billion is overdue and payable immediately. Hubco, in turn owes Rs 61.79 billion to PSO out of which Rs 59.17 billion is overdue.
According to the PPA, Wapda is under obligation to establish a Standby Letter of Credit (SBLC) in favour of Hubco which is a key requirement under the present agreements. Furthermore, PSO has also been demanding the establishment of a SBLC by Hubco required under the Fuel Supply Agreement (FSA) by Wapda. Hubco is unable to provide SBLC to PSO due to Wapda's non-compliance of PPA and consequential non-compliance by Hubco of FSA, the fuel supply situation is further aggravated as PSO has time and again explained both in verbal discussions as well as in written letters that in the absence of any SLBC which is required to be issued under FSA, the external auditors, government auditors and the Board take a very negative view of the fuel supplies at the Hubco plant. PSO maintains that this is an insecure credit extended to Hubco which is against normal business and commercial practices. The situation deteriorates when Hubco is unable to pay PSO invoices in a timely manner. Whatever payments are being made are insufficient, infrequent with too much delay, the sources quoted CFO Hubco as saying.
"We would also like to state our position that consequential losses due to this situation cannot be on account of Hubco as they are caused because of Wapda's defaults of not paying on time and opening the SBLC as stipulated in PPA. We reserve our right under the various concessions ie Power Purchase Agreement (PPA) and Implementation Agreement (IA) for all the consequential losses due to delay in payment and the fault of Wapda by not establishing the SBLC," the company claims.
Keeping in view the current situation, Hubco has foreseen a serious crisis and considering that as Ramazan is around the corner, urges immediate intervention to remedy the situation. Hubco has requested the following steps on an urgent basis ;(i) full settlement of circular debt including all overdue and outstanding invoices;(ii) timely and regular payments in future as per due dates of invoices and ;(iii) establishment of SBLC by Wapda on top priority basis in compliance with the IPPs.