The China Pakistan Economic Corridor Authority (CPECA) has urged the government to devise a mechanism to pay the overdue receivables of Independent Power Producers (IPPs) on a priority basis otherwise they might default.
A presentation given to the Central Power Purchasing Agency-Guaranteed (CPPA-G) has explained i) overdue/ receivables of Rs 250 billion;(ii) IPPs may go in default because of rising prices of coal in international market; and (iii) IPPs may suspend the operations of power plants as per suspension clauses of Power Purchase Agreements (PPAs).
As a somewhat temporary solution it was decided to open up a revolving account (RA). The RA has still not been set up even after the Private Power and Infrastructure Board (PPIB) has signed Supplementary Agreement (SA) with the CPEC IPPs. Consequently the lenders have put their dividends stopper on IPPs because establishment of the RA is part of financing documents.
Due to the non-payment of receivables to existing projects Sinosure, Chinese state owned Export & Credit Insurance Corporation, has stated that it could not support new projects in Pakistan anymore which is also leading to delay in the implementation of second phase of CPEC.