· Federal Government gave green light to the 2nd payment to be made to IPPs in lieu of their outstanding receivables. The approval of the same by the Cabinet would pave way for disbursement of PkR134bn to IPPs.
· This follows the 1st installment of PkR89.8bn made to the IPPs (of which ~30bn was made in cash) in Jun’21 and will take the total payments, made under the tariff re-negotiation agreement back in Feb’21, to PkR225bn.
· As per news reports, the amount is likely to be transferred to the IPPs by Dec 3 where HUBCO is expected to receive PkR34.8bn, KAPCO PkR59.4bn, Rousch Power PkR8.5bn, Fauji PkR2.6bn, PakGen PkR9.8bn and Lalpir PkR9.3bn. While another PkR6bn is to be shared between KEL, Saba Power and FFC.
· While the details of the structure of the 2nd tranche are scant, we expect the GoP to structure the transaction such that only a partial payment is made in cash while the remaining payments will be made in kind (through PIBs and Sukuks).
· As seen in the immediate aftermath of the last settlement where the IPPs announced a dividend payout (HUBC PkR5.0/sh and KAPCO 3.5/sh), second tranche of the settlement may again trigger a dividend payment from these IPPs which may bring them in limelight again.
Courtesy – AKD Research