On Friday Jun 04, 2021, the govt paid PKR 89.9bn to twenty (20) IPPs. The payment was made as per the mechanism agreed earlier between the Govt. and IPPs. As per the agreement, IPPs received 40% of the outstanding amount.

The payment mechanism agreed between the govt. and IPPs was as follows:

• 1st Installment: 40% of the outstanding amount (breakup: 33.3% Cash, 33.3% SUKUK and 33.3% Floating PIBs)
• 2nd Installment: 60% of outstanding to be paid after six months (breakup: 33.3% Cash, 33.3% SUKUK and 33.3% Floating PIBs)

In May 2021, ECC approved the first instalment (40%) of PKR 89.9bn to be made to the IPPs of 1994 and Pre-1994 policies. However, for 2002 power policy plants it may take time as the matter of excess profits is under NAB investigation.

We believe this development will ease off the liquidity position of IPPs significantly.

KAPCO received the highest amount of PKR 39.6bn (PKR 44.99/share) followed by HUBC which received PKR 23.2bn (PKR 17.88/share). PKGP, LPL and KEL received PKR 6.5bn, PKR 6.2bn and PKR 2.0bn, respectively.

However, if the IPPs retire their liabilities as per the proportion of payment received, the net payment per share for KAPCO is the highest amongst all – PKR 18.5/share, followed by PKGP (PKR 10.2/share) and LPL (PKR 3.8/share). The liabilities of HUBC and KEL are higher than their receivables, so their net payment position is negative.

Courtesy – AHL Research