Govt plans to convert Rs800bn PHL debt into public debt

The government has prepared a plan to impose multiple surcharges of over Rs 4/kWh on consumers across the country including those of the KE and conversion of Power Holding Limited’s (PHL) debt of Rs 800 billion to public debt, sources close to Finance Minister told Business Recorder.

Sharing the details, sources said PHL outstanding debt stock as of June 2020 was Rs 1.004trillion. ECC of the Cabinet on May 6, 2022 approved the conversion power sector debt stock of Rs 804 billion into public debt. In compliance with the ECC decision of May 6, 2020 Finance Division, through a supplementary grant cleared Rs. 72.635 billion due in FY 21, while during FY 22 Rs 130 billion were released by Finance Division through regular budget allocation to clear PHL loans maturing in 2022.

Accordingly, repayment of principal of the PHL’s debt released during FY 2020-21 & FY 2021-22 stood at Rs. 202.386 billion and the balance outstanding as of Jun-22 stood at Rs 800.253 billion during FY 2022-23. Out of this balance, Rs 164.310 billion is required to be paid as principal to the syndicate banks against the eight financing facilities.

Over Rs129bn PHL loans: MoF asks PD to engage lenders for rescheduling

Finance Division, in its letter of August 1, 2020 conveyed that due to fiscal limitations and non-provision of Adjuster, only Rs35.00billion are earmarked for the FY 2022-23 against PHL’s repayment of loans as public debt. This allocation of Rs. 35.00 billion is only sufficient to clear principal repayments of the first quarter of FY 2022-23 and the remaining principal repayment of Rs. 129.3 billion for FY2022-23 is required to be rescheduled. Since these principal instalments of Rs. 129.3 billion represent a portion of debt facilities of Rs. 283.287 billion, the full amount of Rs. 283.287 billion needs to be refinanced/ re-rolled.

The matter was taken up with Finance Division to either get an allocation of the required amounts to clear principal repayments due in FY 23 or the option of re-rolling the facilities may be evaluated. Finance Division discussed the modalities of rescheduling options for PHL’s debt of Rs 283.287 billon with leading agents/ banks and other stakeholders and after due deliberation, asked banks to provide term sheets for their balance PHL debt considering a 5-year repayment schedule including a 2-year grace period expeditiously.

It was also discussed and agreed that Finance Division shall provide Government guarantees for repayment of principal, as well as, interest/ fees, etc., for the fresh facilities of up to Rs. 283 287 billion. Consequently, the principal instalment payments shall be deterred for a period of two years from the date of execution of fresh facilities. This will be cash neutral transaction, as disbursement of a fresh facility shall be utilized towards adjusting the outstanding portion of the existing facilities.

Finance Division shall be responsible for the repayment of the principal in respect of the fresh facility of Rs. 283.287 billion.

According to Power Division, out of the total outstanding finance facilities of Rs. 800.253 billion, as of June 30, 2022, servicing of loans amounting to Rs 246. 384 billion is being managed by imposing Financing Cost (FC) Surcharge levied @Rs. 0.43KWh under sub-section 5 of section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997. This Financing Cost Surcharge @Rs0.43 KWh is not sufficient to cover mark-up charges of total PHL loans.

The mark-up of remaining loans amounting to Rs. 553.870 billion is being paid from revenue collected through electricity sales and the same is being added to the circular debt; by June 30, 2022, Rs 194 billion have been paid as mark-up charges by CPPA-G from the revenue collected through electricity sales while an amount of Rs. 55.577 billion is also overdue and payable to OGDCL on account of mark-up till June 2022.

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