Power Sector/Circular Debt Payment: CPPA disbursed PKR 142bn to IPPs – surprise expected from HUBCO, KAPCO, NCPL

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· Central Power Purchasing Authority (CPPA) has disbursed PKR 142bn to IPPs to reduce the stock of circular debt.

· The development aligns with the IMF’s recommendation of reforms and progress in the energy sector in a recently signed staff-level agreement for the SBA facility amounting to USD 3bn.

· To recall, the government also paid PKR 385bn to IPPs of PP 1994 and PP 2002 last year.

· As per the Ministry of Energy monthly report, during 11MFY23, the stock of circular debt increased by PKR 394bn to PKR 2,646bn (Monthly average: PKR 35.8bn) compared to a decline of PKR 27bn during the same period last year.

· Out of the total PKR 394bn increase, PKR 249bn has been added by recovery losses of DISCOs, followed by PKR 171bn of quarter tariff adjustments (QTA) and fuel charges adjustments (FCA). Moreover, PKR 128bn has also been provided through fiscal space.

· Among the listed IPPs; HUBC, NEL (a subsidiary of HUBC), TEL (a subsidiary of HUBC), LEL (a subsidiary of HUBC), NPL, LPL, KAPCO, ROUSCH (a subsidiary of ALTN), NCPL, EPQL, PKGP, and SPWL received the payment.

· Besides the listed IPPs, CPHGC (an associate of HUBC), LEPL (a subsidiary of LUCK), EPTL (a subsidiary of ENGRO), and TNPL (an associate of HUBC) also received an amount of PKR 9.2bn, PKR 5.5bn, PKR 4.3bn, and PKR 1.3bn, respectively.

· NPL has a room of PKR 5.65/share (PKR 11.17 at zero payment of liabilities) for dividend payment after paying all its liabilities. HUBC can pay PKR 10.79/share if the company does not pay its liabilities. KAPCO also received PKR 4.3bn and may announce a PKR 5.0/share dividend. NCPL received PKR 1.6bn but has PKR 6.2bn for short-term borrowings and payables.

Courtesy – AHL Research

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