ISLAMABAD – As the circular debt anew reached to an alarming level of $5 billion, the Independent Power Producers of Pakistan (IPPs) are in severe liquidity crisis.
Hubco Chief Executive Khalid Mansoor said, “Despite payment of around $5 billion circular debt in June 2013, it has again reached similar levels within a year.”
Hubco is Pakistan’s largest Independent Power Producer. He said 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.
He said, “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.” He added that no power project will reach financial close unless the menace of circular debt is controlled. He 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.
