Receivables/payables dispute: Federal govt, KE fail to evolve consensus

ISLAMABAD: The Federal Government and Karachi Electric (KE) teams are said to have failed to evolve a consensus on course of action to resolve receivables/ payables dispute, well-informed sources in Power Division told Business Recorder.

Power Division summoned the KE top brass to convey the Prime Minister’s message to them that no further delay will be accepted in resolution of issues, which are hindering the sale-off of 66.4 per cent stake of M/s Abraaj to Chinese company, M/s Shanghai Electric Power (SEP).

The dispute between the KE and the government is on the “reciprocity clause” as KE’s management wants this clause to be an integral part of the arbitration mechanism.

“Power Division has been directed to make the last-ditch effort to sort out the issue within 7-10 days, and if this attempt fails, then the government will have to opt for Plan B,” the sources added.

The ‘Plan B,’ as explained by sources, would entail appointing an administrator by the government or take over the power utility temporarily as per the NEPRA Act, 1997 and clean its books, sign Gas Supply Agreement (GSA) and Power Purchase Agreement (PPA), re-privatise it and pay due share to M/s Abraaj.

“Government wants arbitration sans reciprocity clause, which will not be acceptable to the power utility as some influentials in government have their own plans,” said an insider.

KE’s team, which left the meeting ‘red-faced’, sources said, has been asked to proceed towards arbitration to resolve outstanding amounts of SSGC, CPPA-G and KE, but not taking account of KE’s receivables against Karachi Water and Sewerage Board and pending subsidies. KE maintains that a clause should be included in the terms of reference in advance, which should state that there would be reciprocity.

The government’s team dealing with the KE issues is of the view that if reciprocity is made part of the ToRs of arbitration, then the case of receivables will no longer exist; but in reality the dispute is on reciprocity.

The sources said, KE’s logic has been rejected by the government team, which took a rigid stance during discussions. The KE’s Chairman appeared astonished at the atmosphere that prevailed in the meeting.

KE argued that besides addressing issues of receivables/ payables, the resolution of operational aspects including commercial agreements with SSGCL and CPPA is imperative to avoid recurrence of problems countered by KE.

The power utility further states that it is not easy to sustain smooth operations if there are extended delays in receipt of dues, including subsidy amounts.

According to sources, Power Division has conveyed that terms of references need to be agreed on old stock. KE has been given three to four days to come back with its suggestion.

KE is of the view that if it is not getting the amount of subsidy from Finance Ministry and it pays interest on bank financing, a surcharge in tariff may be included in the agreement.

Power Division has also asked the KE what guarantee it will give for timely payment against supply of 1400 MW electricity from the national grid.

Power Division is unwilling to accept KE’s offer that it will pay from the amount of subsidy, the sources said, adding that KE has to open a special account of its recovery from where CPPA-G will deduct its due amount. Presently, KE’s Rs 2 12 billion is part of circular debt.

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