Govt, banks discuss debt recapitalisation of power plants

KARACHI: The government is in the process of privatising National Power Parks Management Company Limited (NPPMCL), which owns Haveli Bahadur Shah Power Plant (1,230 megawatts) in Jhang district and Balloki Power Plant (1,223MW) in Kasur district, said Federal Minister for Privatisation Mohammed Mian Soomro.

Chairing a meeting with heads of local commercial banks on Friday, he said that both power plants were established through government funding or equity instead of the debt-to-equity ratio allowed by the National Electric Power Regulatory Authority (Nepra) under tariff determination for NPPMCL’s power plants.

“It has been decided to align the capital structure as per the allowed tariff through long-term debt financing from banks,” the minister said.

Citing that the privatisation of NPPMCL was a large transaction, Soomro said that the Privatisation Commission would coordinate with all stakeholders to fulfill the national cause.

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Speaking on the occasion, Ministry of Privatisation Director General Muhammad Jameel said that the aim of the meeting was to discuss debt recapitalisation and refinancing or replacement of government’s excess equity loan through commercial borrowing by NPPMCL.

“Once the debt portion of these two power plants is settled, they will be privatised,” he told the participants.

A comprehensive presentation was made by the Ministry of Privatisation and a thorough discussion was held on the terms and conditions of the refinancing process.

Presenting the terms of borrowing, another official of the Ministry of Privatisation remarked that all commercial banks and financial institutions regulated by the State Bank of Pakistan were eligible to submit their bids.

The loan amount stands at Rs113 billion and the tenure will be seven years while the principal amount will be repayable on a quarterly basis as per Nepra’s guidelines. Moreover, the profit on debt or interest will also be paid on a quarterly basis.

The meeting was told that collateral or security would be decided according to the terms of power purchase agreements and implementation agreements of the power projects.

Moreover, the maximum ceiling on fixed spread would stand at Kibor plus 1.8% per annum. NPPMCL may draw down the loan at any time in one or more installments.

The meeting was informed that the repayment dates of mark-up and principal amount would be September 30, December 31, March 31 March and June 30 and the repayments would begin at the end of the quarter during which the first draw down of funds is taken.

Apart from this, the criteria for bidding and transaction award is that the loan shall be obtained from the bidder offering the lowest (fixed) spread relative to six months KIBOR as per Nepra’s guidelines.

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