Ministry threatens to terminate 650 megawatts supply to K-E

Ministry of Water and Power has reportedly threatened to terminate 650MW power supply to Karachi Electric (KE) in case the power utility does not clear the ‘outstanding’ payment of Rs 51 billion, well informed sources told Business Recorder.

A delegation of K-E recently met Secretary Water and Power Younus Dagha in Islamabad to seek his help in getting federal government’s consent on new Sale Purchase Agreement (SPA) between Abraaj Group and Shanghai Electric. However, the incumbent management failed to convince Secretary Water and Power because no documents about the new deal were shared with him.

M/s Shanghai Electric of China will acquire 66.4 percent stake in K-Electric for $ 1.77 billion from the Abraaj Group. SECP maintains that Shanghai Electric Power is legally required to submit a copy of agreement for acquisition of voting shares of the K-Electric within 180 days of the public announcement of the intention.

According to sources, Ministry of Water and Power has written a letter to the Chief Executive Officer (CEO) of K-E, saying that Power Purchase Agreement (PPA) between K-Electric and NTDC expired on January 25, 2015 and revision of which is under discussion, adding that it was discussed and decided that as per clause 9.3 of PPA, the energy payments after adjusting the subsidies, energy payment of NTDC/CPPA would be paid from July 2016 onwards. However, this commitment has not been honoured by K-E despite the fact that energy payment is now much higher than the subsidy amount.

Ministry of Water and Power has also rejected any new payment mechanism as is being suggested by the KE management, saying that to make these payments, no new proposal is required to be adopted as the existing mechanism, under PPA, is adequate.

“Ministry of Water and Power has advised that payments of energy supply be immediately made through the applicable mechanism, NTDC/CPPA will not be in a position for continuation of supply or revision of PPA in presence of the outstanding payments and in absence of energy payments. It may be reiterated that the non-payment of NTDC’s energy invoices has reached more than Rs. 51 billion and further default will compel the power supplier to opt for reduction/ termination,” the sources maintained.

Ministry of Water and Power, sources said, in another letter written on November 3, 2016 to K-E management gave reference of a letter written on October 19, 2016 whereby it was requested to share the draft agreement between existing K-Electric management and new management in order to ensure that the interests of the Government of Pakistan and general public are safeguarded in pursuance of Cabinet Committee on Energy (CCE) decision of August 30, 2016. However, the K-Electric in its letter of October 26, 2016 stated that it did not have these documents at this stage so could not share them with the committee constituted by the CCOE headed by Prime Minister Nawaz Sharif.

According to the Ministry, as per a media report, it believes that the agreement/arrangement between existing K-Electric management and the new management has been finalised. The Ministry has once again requested that these documents be immediately shared and a presentation be made to the committee on the new transaction by senior members from existing and new K-Electric management.

Copyright Business Recorder, 2016