ECC okays diversion of Rs10bn from Covid-19 relief fund to power sector debt repayments.

Byline: Khaleeq Kiani

ISLAMABAD -- The Economic Coordination Committee (ECC) of the Cabinet on Wednesday allowed talks on extension of debt repayment period of power plants - in both public and private sector - from the existing 10-year period to 20 years for about 65 paisa per unit cut in average capacity tariff and approved diversion of about Rs10 billion from Corona Relief Package to power sector interest payments.

The ECC meeting, presided by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh also decided against rescheduling of foreign commercial debt as it allowed signing of memorandums of understanding for about $2.04bn debt relief with G-20 members.

The ECC also approved terms of reference for negotiations with independent power producers and generation companies to reduce capacity charges.

According to sources, the officials informed the ECC about loans taken by power producers that could be stretched from the existing 10 year period to 20 years and financing gaps that could be filled through issues of bonds under synthetic refinancing structure.

A group of businesspersons led by Mian Mansha had initially presented this proposal to the Ministry of Finance. The scheme would cover about 10,000MW of generation capacity involving projects with remaining debt-servicing period of 3-4 years.

No rescheduling of commercial loans

The scheme would be applicable on power projects with 10,000MW power generation capacity. The shortfall occurring every year for the period ending the original debt term will be funded by a series of bonds on behalf of the Power Holding Limited - a shell company of the Power Division.

The sources said that, at present, all power plants are frontloaded -- the entire debt is repayable in the first 10 years against 25-30 years of project life.

In case of extension in debt, the original debt term will remain unchanged but banks would purchase the debt through bonds for another 10-13 years at a premium and hence staggering the capacity repayment period.

The existing lender would get what it had contracted but it would stretch power purchaser's liability. As such, the long-term basket price would be higher for consumers but initially they would get about 65 paisa per unit reduction in initial years.

The ECC allowed allocation of Rs10bn from Stimulus Package as a stopgap arrangement for interest payments to the Pakistan...