ISLAMABAD: The Privatization Commission (PC) has reportedly warned the Petroleum Division that the debt recapitalization and refinancing of RLNG-powered power plants owned by the National Power Parks Management Company Limited (NPPMCL), i.e. Haveli Bahadur Shah and Balloki Power Station would be affected if issues related to guaranteed gas supply are not addressed immediately, informed sources said company registrar.
The warning issued by Director General (Power) PC Iftikhar Naqvi to all relevant stakeholders, including the Chairman of the Privatization Commission and the Secretary of the Privatization Commission, noted that the process of recapitalization and refinancing of NPPMCL’s debt is at an advanced stage.
The validity period of offers for NPPMCL’s debt recapitalization and refinancing process will expire on June 18, 2022. Conditions on precedents for project financing required by banks must be met within the stipulated time. A delay in resolving these issues can delay the process.
According to sources, PC sought the intervention of the oil division on the following points for a quick resolution before the critical deadline:
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(i) NPPMCL is currently facing an Event of Default (EoD) in the amount of Rs 113 billion in relation to the provision of the required gas supply depot under the terms of the GSA. The banks anticipate a risk that SNCPL could interrupt gas supply to NPPMCL in the future – a difficult precondition for bank financing; (ii) during negotiations on the terms and conditions, the banks demanded an amendment to the GSA to the effect of reducing the Gas Security Deposits based on the existing 9 billing cycles to 3 billing cycles; and (iii) a Letter of Comfort (LoC) from the Petroleum Division indicating that the supply of gas will not be interrupted by SNGPL, so that the lending banks can be persuaded to reconsider this EoD.
According to PC, failure to resolve an existing issue could hamper NPPMCL’s debt recapitalization process. The issue of amending the Implementing Agreement (IA) regarding “Lender Financial Close” is under discussion at the end of the PPIB.
Recently, the Government of Pakistan approved the “Debt Recapitalization and Refinancing of NPPMCL” through a competitive process to increase long-term debt up to Rs 110 billion. Accordingly, on the instruction of the Privatization Commission, NPPMCL solicited proposals/bids from banks/financial institutions based on a “Request for Proposals (RFP)” provided by the Privatization Commission.
As per the provisions of the tender, the guarantee/guarantee for the long-term loan would be in accordance with the IA and power purchase agreements (PPAs) of the energy projects, i.e. a mortgage/charge on company fixed assets, an assignment on capacity receivables and pledge of company shares in favor of banks/financial institutions. As a result, the banks requested NPPMCL to approach its shareholders to arrange the necessary internal approvals to sign share pledge agreements with the banks/financial institutions for the said transaction.
The source said that 249,999,997 shares of the company are already issued in the name of the President of Pakistan against the seed capital injected by the Pakistani government.
The Privatization Commission has requested that Federal Government approval for signing Share Pledge Agreements (SPA) with Banks/Financial Institutions be arranged in respect of shares held in the name of the President of Pakistan, as well only the authorization of any appropriate officer of the Power Division to sign it.
Meanwhile, NPPMCL said its receivables were gradually accumulating and reached Rs 190 billion, of which Rs 160 billion is overdue.
According to the company, the critical situation creates difficulties for NPPMCL to settle its contractual obligations such as payment to SNGPL, the insurance company, payment of the mark-up on working capital facilities, payments to the long term service (LTSA) and O&M contractor fees, etc. .
NPPMCL has repeatedly requested CPPA-G to release funds from the company’s energy receivables to settle SNGPL’s outstanding RLNG bills.
Copyright Business Recorder, 2022