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PSN arrears: Wapda refuses to raise a loan

ISLAMABAD: The Water and Power Development Authority (Wapda) would have refused to raise a loan of Rs 25 billion to pay the arrears of Net Hydel Profit (NHP) to the provinces, saying that such a decision would further worsen its liquidity crisis, according to sources close to the secretary The Ministry of Water Resources told Business Recorder. This position was conveyed by Wapda Finance Officer Naveed Asghar Chaudhary to Energy Division Secretary Ali Raza Bhutta.

Wapda is currently executing the largest development projects worth $ 26 billion after a period of nearly five decades. These are vital projects for Pakistan to meet the challenges of water scarcity and energy security.

Giving the logic to oppose the proposal of the division of power, Member Finance (Wadpa) claimed that during the meeting held in the chamber of the President of the National Assembly, Asad Qaiser in April 2021, it was agreed that the clearance of PSN arrears would be carried out by the Ministry of Finance through the adjustment of budgetary subsidies from the Electricity Division.

According to Member Finance, who is reportedly interested in the post of Wapda chairman, after the outgoing chairman’s term expires this month (July) 2021, Wapda has made it clear that he is unable to take out another loan. than 105 billion rupees earlier. raised by it for PSN payments resulted in a financing cost of Rs 11 billion, which was recently cleared by the National Electric Power Regulatory Authority (Nepra) after nearly five years. Wapda has still not received payment for this.

Wapda argues that what is mentioned by the Electricity Division in its summary on NHPs, there is no constitutional responsibility on it to take out loans for the payment of PSN. Wapda is simply supposed to route payments made by the Central Power Purchasing Agency – Guaranteed (CPPA-G) against NHP.

“The late payment of the CPPA-G resulted in an accumulation of arrears, which was not Wapda’s fault,” he added.

As a result of any additional loans from NHP, Wapda says it would face cash and funding shortages to meet essential O&M, debt servicing and equity injection needs for its operational projects. and development.

“We can no longer load our balance sheet with NHP loans as this would compromise our ability to raise additional loans of around Rs.1153 billion, which is the quintessence of our plans,” he said, adding that any delay in arranging the required trade finance due to an overburdened balance sheet can potentially affect project timelines.

Wapda also claimed that its hydroelectric claims from CPPA-G are steadily accumulating and have now reached a staggering 242.2 billion rupees.

“We have constantly asked Power Division for a prompt settlement of these dues, as they exhaust our ability to meet financial needs,” he said.

Wapda raised $ 500 million in an agreement on June 4, 2021 via its first Green Bond in the international market to fund the Mohmand and Diamer Bhasha dam projects. This is a 10 year bond with a coupon of 7.50% per annum payable annually until maturity and any delay in meeting this requirement would have serious repercussions on the financial viability of Wapda and the completion of its projects on time.

“We have already asked Power Division to increase Wapda’s monthly share to Rs 5 billion to meet this need,” he continued.

Chaudhary further argued that Wapda’s return on equity (RoE) had been reduced to 10%. The organization needs additional funding to fill this gap. Any further loan from NHP would further exacerbate Wapda’s liquidity problems.

Copyright Business Recorder, 2021

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