Danger of default over payment to power company

VIAKhaleeq Kiani

ISLAMABAD: The 969MW Neelum-Jhelum Hydropower Company (NJHPC), Wapda and the government of Pakistan will go into default if energy payments to the firm do not begin within a month as the power sector is using its unaccounted units for showing a reduction in line losses, a National Assembly panel has been informed.

“If revenue from the Central Power Purchase Agency (CPPA) does not commence by December 2019, the NJHPC/Wapda/GoP shall go into default due to back-to-back guarantee, apart from the NJHPC not meeting the routine maintenance expense,” said the company CEO retired Brigadier Mohammad Zareen while testifying before the National Assembly Standing Committee on Planning and Development on Wednesday. The meeting was presided over by MNA Junaid Akbar.

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Mr Zareen also reported that the Chinese contractor had left the project at a point when the project had attained 99.6pc completion and some minor work was outstanding, after shelling by the Indian Army at the dam site on July 30, and Oct 19, 20, and 24. He said the contractor was not willing to return. The NJHPC had moved through the foreign affairs ministry, that had taken up the matter with Beijing and hopefully the contractor would soon resume its job as required under warranties.

Neelum-Jhelum project CEO tells panel that payments have not been made for electricity supplied

Mr Zareen said the company’s annual debt service liability amounted to Rs50 billion and it was getting regular letters from the Economic Affairs Division (EAD) every month for the servicing of debt to external lenders. “I will not have the funds to pay even for salaries after December”, he said, adding that the Rs100bn raised from local banks was currently being utilised for debt servicing, the payment of salaries, and other expenses.

He said the National Electric Power Regulatory Authority had given interim tariff at the rate of Rs5.9180 per KWh for one year that was notified on March 8, 2019, but the NJHPC had not so far been paid a single rupee by the CPPA against the more than six billion units (kwh) it supplied to the national grid.

According to Mr Zareen, the state-run CPPA was not signing the power purchase agreement (PPA) that had been lying with it since July this year. “The PPA between the CPPA-G and the NJHPC, drafted and cleared by the legal section of the CPPA in June 2019, was submitted to the CPPA in July 2019 for approval of invoicing of payment of energy delivered, but is not being approved”.

Resultantly, the NJHPC has not been paid for energy delivered to date. He said that Nepra had also revised interim tariff to Rs9.1184 per unit on the NJHPC’s request in August 2019 but that was not also being notified. Final tariff application was currently under process, he said.

Mr Zareen informed the committee that 6bn units of electricity supplied by the Neelum-Jhelum project to the power sector was being kept unaccounted for and shown as a reduction in line losses. The committee decided to invite power minister Omar Ayub Khan to push for the resolution of the issue.

The company CEO said the CPPA was hampering the signing of the PPA and invoicing the mechanism by taking the stand that the NJHPC’s tariff be clubbed with Wapda tariff, despite the fact that the NJHPC was an independent company registered under the Securities & Exchange Commission of Pakistan and the power regulator had approved a separate tariff.

Responding to a question, Mr Zareen said the clubbing of the NJHPC tariff with Wapda was not only impractical but also involved serious legal and taxation ramifications. He said that unlike Wapda, the company had some tax exemptions while there were also legal issues relating to the export of electricity from Azad Jammu & Kashmir. He said that Wapda already had stacked up payables of over Rs200bn with the CPPA.

He said that because of the above issues, payments of Rs1.10 per unit to AJK as the water-use charge was not being made. Lawmakers expressed concern that the AJK government’s budget estimates were being affected by a procedural dispute.

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Responding to a question on the Neelum-Jhelum surcharge being charged to consumers, Mr Zareen said that about Rs60bn had so far been collected under the head and were being utilised by the company but another Rs60bn on account of energy sold to the CPPA remained unpaid.

Zargham Eshaq Khan, joint secretary power, declined to directly comment on the treatment of NJHP generation for loss reduction. Another official said that the units supplied by the NJHPC would be actualised once the PPA was in place. He denied that 6bn units were going unaccounted for.

The committee was informed that the revised approved cost of the 969MW project stood at Rs506bn but the project had been completed at a cost of about Rs420bn.

Published in Dawn, November 28th, 2019

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