ISLAMABAD: The government has adopted a unique way to seek go-ahead from International Monetary Fund (IMF) for signing the much-awaited amended power purchase agreements (PPAs) with independent power producers (IPPs) in line with some terms and conditions the government signed with the Fund under a $6billion loan programme, well-placed sources told The News.
Pakistan sought approval of the IMF over the financial instrument under which dues of Rs392 billion will be paid to IPPs. Interestingly, not energy minister or special assistant to PM on power sector, but Khalid Mansoor, CEO of Hubco, which is one of the biggest IPPs, represented the government in a briefing to IMF seeking the green signal through financial tool of zero coupon bond for payments of dues amounting to Rs392 billion to IPPs.
In the briefing to the IMF, along with him was also an officer from the Finance Ministry which means that Khalid Mansoor enjoys the backing of Finance Ministry to persuade the IMF over the mode of payments to IPPs. “This has happened for the first time in the history of Pakistan that a man from private sector was given assignment to persuade the IMF over the proposed mode of payments of dues to IPPs and this has raised eyebrows of many.”
However, Finance Ministry says it is general practice of IMF to hold meetings with private sector people. It also says IMF functionaries sometimes hold meetings with business community and office bearers of chambers of commerce. So this is route practice of the IMF. The meeting of Khalid Mansoor with IMF is not backed by the government. “And there is no question of giving a big role to any one from private sector on behalf of the government.” Adviser to the PM on Finance and Revenue Dr Hafeez Shaikh has now been assigned to lead the memorandums of understanding (MoUs) (signed with IPPs) execution committee.
Khalid Mansoor has also been the head of IPPAC (Independent Power Producers Advisory Council) and was in talks with the government on material changes in existing PPAs. According to the well placed sources, IMF has refused to accept the financial instrument of zero coupon bond floated by Khalid Mansoor to offload dues of IPPs arguing zero coupon bonds is not doable as it is not backed by sovereign guarantee of the government.
“Now the Finance Ministry will be bound to seek permission for giving sovereign guarantee for government bonds to generate money for payment of arrears of IPPs,” sources said. They said that in the past at one point in time, IMF had stopped the government for issuing bonds of Rs200 billion for payments to IPPs, but after some months it allowed the government to extend the guarantee for the bond to generate Rs200 billion. “Since, this time the government has to pay the huge amount of Rs392 billion and if it wants to offload arrears through the government bond, it will have to again seek permission from IMF.”
It is pertinent to mention that the government has signed MoUs with 50 IPPs to bring down the electricity tariff, but they (IPPs) have refused to sign the formal agreements until and unless the government pays their dues which stand at Rs392 billion.
The signed MoUs will expire in six months and within six months’ time, the government is bound to shape the MoUs into legal agreements and to this effect two months have already elapsed. Under the signed MoUs, the government will have to pay the dues of IPPs with mechanism supported by some guarantee. When contacted, Khalid Mansoor confirmed the development, saying: “I briefed the IMF over the government efforts to amend the existing PPAs in the light of MoUs signed with IPPs. I briefed the Fund the IPPs dues can be cleared through zero coupon bond.”
He further said that the IMF will respond to the government after evaluating the proposals.
A zero coupon bond is a bond in which the face value is repaid at the time of maturity. That definition assumes a positive time value of money. It does not make periodic interest payments or have so-called coupons, hence the term zero coupon bond. When the bond reaches maturity, its investor receives its par value.
Mansoor said the approval of the Fund is imperative in line with the terms and condition the government signed for the loan programme. When asked as to why he has been assigned by the government for this job when it has a special assistant on power sector, he said that he has been assisting the government in private capacity in the past and whenever the government seeks his services in the power sector, he will be there.
Khalid Mansoor is CEO of Hubco and in the past he also remained employee of Engro and interestingly Minister for Planning Asad Umar, who is also chairman of Cabinet Committee on Energy (CCoE), had also been the employee of Engro in the past and the sources insisted that Asad Umar played important role to select Khalid Mansoor for briefing to IMF over ongoing developments with IPPs in terms of amending their PPAs and mode of payments to them.
However, Asad Umar, who is also chairman of Cabinet Committee on Energy, simply responded, saying, “Don’t know as I am not involved in IMF discussions.”