Power sector dues: Govt defaults on sovereign guarantees
By Shahbaz Rana
ISLAMABAD: Failure to honour its financial commitments to Independent Power Producers (IPP) has led to the first-ever sovereign default by the government in Pakistan’s history.
The default on sovereign guarantees – assurances the government provides to foreign investors – may not only unnerve the financial markets, but also downgrade the government’s creditworthiness, making it more expensive to borrow money.
“Today, the government of Pakistan has committed a sovereign default for the first time in the history of the country”, announced the IPPs Advisory Committee here on Tuesday.
“The government has defaulted on payments of roughly Rs45 billion to nine IPPs that generate 1,700 megawatts of electricity”, said Abdullah Yusuf, Chairman IPP Advisory Committee while talking to The Express Tribune. These nine IPPs started operations in 2004 and their total receivables amount to almost Rs232 billion.
Taking legal course
The IPPs gave a 30-day payment notice to the power purchaser, the Central Power Purchasing Agency (CPPA), followed by a 10-day notice to the government. Neither the CPPA nor the government cleared the overdue amounts, said the advisory committee.
The IPPs have exhausted all avenues available and the notice served to the government expired on Tuesday, the committee said.
After the default, the IPPs have issued a legal notice to the government for recovery by Thursday, May 10th, 2012 failing which the IPPs will follow a legal course.
Yusuf said the IPPs will go to the Pakistani courts.
“The default is a very serious matter and carries negative implications for the country”, Yusuf added. ….
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