The Economic Coordination Committee (ECC) of the Cabinet, Tuesday, approved four proposals of the Ministry of Water and Power for the issuance of new sovereign guarantees by Ministry of Finance in respect of Fresh Syndicated Term Finance Facilities for Power Holding (Private) Limited in order to set off / adjust existing facilities.
Ministry of Finance will provide government guarantee for the repayment of loan as well as interest for the fresh facilities. In all four cases, the principal installment payments shall be deferred for a further period of 2 years from the date of execution of the fresh facilities.
Ministry of Water and Power has reportedly planned to raise around Rs 185 billion loans from private banks afresh to pay existing loans as power Distribution Companies (Discos) have expressed their inability to pay loans due to financial constraints.
In this regard, Ministry submitted four or five similar summaries to the Economic Co-ordination Committee (ECC) of the Cabinet. These summaries were part of the agenda of the ECC held on July 18, 2017 but did not come under consideration.
Ministry of Water and Power, in its summaries, has 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%, have now crossed 93% in 2015 and 2016, the highest in the history of the sector. Similarly, the T&D losses which were around 19% in 2014 came down to 17.8% 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 were making a cumulative loss of Rs 7.785 billion in 2013-14, and 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 5-16) 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 on average used to be around Rs, 200 billion annually in the past. This brought down power sector’s burden on national budget from 2.4% of GDP in 2012-13 to around 0.7% of the GDP in 2014-1 5, (only subsidy allocations).
ECC met here with Finance Minister Ishaq Dar in the chair and approved a proposal of the Ministry of Water and Power, regarding an existing Term Finance Facility for Power Holding (Private) Limited, to restructure the facility by extending the tenor of the facility from 7 years to 10 years, including extension in grace period from 3 years to 6 years.
The ECC, after considering and deliberating upon another proposal of the Ministry of Water and Power, approved the Standard Implementation Agreement (IA) for transmission line projects under Policy Framework for Private Sector Transmission Line Projects, 2015. As per the same proposal, the ECC also approved the TSA for HVDC Transmission Project (*660 kV Matiari-Lahore).