"The Finance Ministry says it has no fiscal space for power sector and arranged Rs 200 billion structured Islamic financing facility from Meezan Bank Limited against Wapda, Discos and Gencos assets," the sources added. However this amount has not yet materialized due to delay in some approvals from the SECP, the SBP, etc.
The option of Islamic financing against assets of Discos and Gencos was supported after concluding that the new Nepra Act does not allow Government of Pakistan (GoP) to impose surcharge on consumers. The facility structure is defined as diminishing Musharakah/Ijara (sale and lease back).
"We are getting few necessary approvals for Rs 200 billion Islamic financing which is expected to be finalised in two weeks time," said an official on condition of anonymity. The financing will be notified in the Gazette of Pakistan by the Ministry of Finance as federal government obligation and be declared SLR eligible for Islamic banking institutions by SBP.
In the first phase, six Islamic banks - Meezan Bank Limited, BankIslami Pakistan Limited, Faysal Bank Limited, MCB Islamic Bank, Dubai Islamic Bank Limited and Al Baraka Bank Limited - have committed to financing Rs 100 billion to the facility on immediate basis. Another tranche of Rs 100 billion may be arranged from the Islamic banking industry as Green Shoe option (in the best effort basis).
The indicative commitments from the six banks are as follows: (i) Meezan Bank Limited - up to Rs 50 billion; (ii) BankIslami Pakistan Limited - up to Rs 20 billion; (iii) Faysal Bank Limited - up to Rs 20 billion; (iv) MCB Islamic Bank - up to Rs 10 billion; (v) Dubai Islamic Bank Limited - up to Rs 8 billion; and (vi) Al Baraka Bank Limited - up to Rs 5 billion. Meezan Bank will act as Investment Agent.
The facility will be redeemed through execution of sale and purchase agreement for repurchase of the assets by the Government at maturity. The GoP will provide a sovereign guarantee to the financiers for payment of rentals.
Earlier, the commercial banks refused to extend even Rs 50 billion due to their existing exposure to the power sector.
An official said that presently the pace of increase in circular debt has come down remarkably due to recovery and anti theft drive across Pakistan, adding that only Rs 4 billion has been added to circular debt during the past four months of current fiscal year against Rs 12-16 billion in the same period the year before.
According to the official, Central Power Purchasing Agency Guaranteed (CPPA-G) is almost current on capacity payment to Independent Power Producers (IPPs). However, Power Division top brass is in distress after the contracts of IPPs landed in the Supreme Court of Pakistan.
The amount of Rs 480 billion paid to the power sector companies, gas companies and PSO by the former government has now landed in National Accountability Bureau (NAB) for investigation.
