IPPs in severe liquidity crisis

[Jzaib]

IPPs in severe liquidity crisis
January 20, 2015/ 1 Comment
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Imran Ali Kundi
inShare
ISLAMABAD
The Independent Power Producers of Pakistan (IPPs) are in severe liquidity crisis owing to the alarming level of circular debt and power purchaser’s default on its contractual agreement, as the circular debt once again reached to $5 billion.
“Despite payment of around $5 billion circular debt in June 2013, it has again reached similar levels within a year”, said Khalid Mansoor -Chief Executive, Hubco, Pakistan’s largest Independent Power Producer (IPP), while talking to media. He informed that circular debt consist of due payment of IPPs as well other public sector power entities including refineries and oil companies.
He said that Wapda’s payment default has resulted in severe effects on the financial viability of the power plants and has affected the sustainability of the operations. Condition is such that the IPPs are on the verge of collapse, despite engaging their entire working capital resources.
“There is no other solution to resolve circular debt other than enhancing the power subsidy and / or increasing consumer tariff and improvement on power sector governance issues”, Khalid Mansoor said and added that no power project will reach financial close unless the menace of circular debt is controlled.
“In order to ensure financing of the new IPPs, the Government must address issues related to circular debt and power sector governance”, he said.
Khalid Mansoor said that country’s existing energy mix is neither sustainable nor affordable as over 40pc of power generation is dependent on imported Residual Fuel Oil (RFO). Oil imports make about 33pc of the country’s total imports. This results in higher cost of power generation, alarming levels of circular debt and high import bills draining country’s foreign reserves. The country’s oil import bill is $15 billion.
He said that it is imperative to curb our dependence on foreign oil and look towards investments in indigenous resources like coal and hydro that can help build our local energy economy. Creating this energy economy is not only a stopgap measure to meet the challenges, but also an opportunity that can be seized and cultivated to deliver long-term socio-economic benefits for the country and its residents, he added.
Globally, the percentage of energy production through coal out of the total energy mix is approximately 41pc; however for Pakistan this stands at a massive low of 0.1pc - a fact which is both alarming and comforting - alarming due to its low constitution and comforting in the fact that we can still make judicious investments today that will help us overcome this threat, he informed.
“Coal can reduce the import bill significantly. Tariff for electricity generated through coal is estimated to reduce to $10/kWh from the current RFO based tariff of $19~22/kWh. Coal conversion will reduce the import bill by substitution of expensive RFO with cheap imported coal as the first step. As a second step, reliance on imported coal will be substituted with indigenous coal, ensuring energy security and better balance of payments for Pakistan”, he remarked.
Khalid Mansoor said that Hubco’s Board of Directors has given its management the mandate to develop a 2x660 MW (with an aspiration of 6x660 MW) Imported Coal Based power plant and coal jetty. The two projects would be completed by June 2018.
He said that Thar coal is the only solution for ensuring the energy security of Pakistan. The mines must be scaled up with proper infrastructure for coal transportation within the country, he added.
IPPs in severe liquidity crisis

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[Al Bhatti]

This is just a small example of how planning is done by people who keep the development of the nation among the top priorities.

The electricity requirement of next year should be available and ready an year earlier. But for that you need the right people in the right place.

Above chart is of Dubai.

Electricity Statistics 2013

 

[BetterPakistan]

@Danish saleem again would you like to comment here?

 

[SBD-3]

The core of circular debt is the non payments of electricity dues. The only solution to this problem is either to privatize the descos or hand them to their respective provincial government. However, in reality investors would only be interested in descos of Punjab where the collection rate is 90%+. Investors won't even touch descos of interior sindh,KPK and Balochistan where the collection runs as low as 50%. But neither would their respective provincial governments would be willing to do so because of unwillingness/inability to turn them around. One alternative solution is to only allow prepaid meters in such areas so that the non-payment could be curbed. However, this solution won't be able to curb theft by the means of kundas.

 

[anilindia]

Is oil crisis still not solve. ??

 

[DGMO]

I see load-shedding breaking all records from April - September this year. There are too many factors that point to this, not least the circular debt crisis ballooning once more. Pakistan is in for a horrible period bringing immense suffering.

Although some might say it's in that permanent state anyway.

 

[Danish saleem]

@Danish saleem again would you like to comment here?

Its true that from last 15 years, we haven't give attention, to our power sector , and from last several years we are facing the tremendous power shortage.

But its also the fact that in Karachi , in my Home , no load shedding from last 2 years at all.
Like PML Q, PPP, today PML N government failed in tackling power crises.

 

[BetterPakistan]

Its true that from last 15 years, we haven't give attention, to our power sector , and from last several years we are facing the tremendous power shortage.

But its also the fact that in Karachi , in my Home , no load shedding from last 2 years at all.
Like PML Q, PPP, today PML N government failed in tackling power crises.

I am happy that you successfully accepted wrong things done by the govt. BTW i want to tell you that yesterday there was a little rain and electricity was off from many areas in karachi, so a little rain can stop Pakistan industrial etc sectors to work on for hours till the rain is stop. Electricity crisis in PPP reign was worst and PML N is second one however in PML Q reign there was loadshedding but very low as compared to today.

 

[Daneshmand]

How can this be? With such low oil prices, these thermal stations must be running at full capacity.

 

[Faiez]

Very very poorly written article. Fails to mention low oil prices. Quotes wrong energy prices ($10/kw-hr, seriously? or you probably meant rs.10/kw-hr ?)

 

[Danish saleem]

I am happy that you successfully accepted wrong things done by the govt. BTW i want to tell you that yesterday there was a little rain and electricity was off from many areas in karachi, so a little rain can stop Pakistan industrial etc sectors to work on for hours till the rain is stop. Electricity crisis in PPP reign was worst and PML N is second one however in PML Q reign there was loadshedding but very low as compared to today.

Brother,

i was on the road, and i not noticed any power breakdown during Rain.
About load shedding , i have witness improvement in Karachi during last 5 years, i not agree with you at all in terms of karachi. I told u not load shedding in my home from last 2 years, and two time 1.5 hour load shedding at office Area.

I am happy that you successfully accepted wrong things done by the govt. BTW i want to tell you that yesterday there was a little rain and electricity was off from many areas in karachi, so a little rain can stop Pakistan industrial etc sectors to work on for hours till the rain is stop. Electricity crisis in PPP reign was worst and PML N is second one however in PML Q reign there was loadshedding but very low as compared to today.

What do u think, PTI able to tackle current Electric crises if they were in power??

I think no at all, may be they were bigger failure, because Imran khan not have any Exposure internationally in terms of Foreign Investment in Power Sector! and i support NS on Chinese Investment in Power Sector.

 

[BetterPakistan]

Brother,

i was on the road, and i not noticed any power breakdown during Rain.
About load shedding , i have witness improvement in Karachi during last 5 years, i not agree with you at all in terms of karachi. I told u not load shedding in my home from last 2 years, and two time 1.5 hour load shedding at office Area.



What do u think, PTI able to tackle current Electric crises if they were in power??

I think no at all, may be they were bigger failure, because Imran khan not have any Exposure internationally in terms of Foreign Investment in Power Sector! and i support NS on Chinese Investment in Power Sector.

As far as I have researched PTI have started power projects of which in total will produce thousands of megawatt at the end of there term and PTI is mainly focusing on Hydropower which is the cheapest and clean source of energy. They have given solar panels to farmers for tube wells also. PTI has made their street lights get electricity through solar power. They have also started producing electricity through gas. I read a newspaper in which PTI was selling electricity at very cheap rate to industrial sector.

As far as China investment is concerned China is investing in Pakistan not because of NS just because of Pakistan because China knows that pakistan has much potential and China is thirsty for Gwadar port . brother please have a look at how chinese investment is being used to make energy and how much is going in their pockets and how much is beign wasted due to lack of knowledge