Rental power projects requirements: banks not satisfied with Pepco presentation

[Naveed Yaseen]

Rental power projects requirements: banks and DFIs not satisfied with Pepco presentation
MUSHTAQ GHUMMAN
ISLAMABAD (March 02 2009): Pakistan Electric Power Company's (Pepco) role has irked leading banks and DFIs because of its inability to properly explain rental power projects, sources in the Ministry of Finance told Business Recorder. This is likely to further delay implementation of these projects and jeopardise the government's goal of eliminating load shedding by the end of 2009, they said.

National Bank of Pakistan (NBP) arranged a meeting of leading banks and DFIs on February 24, 2009 to discuss and finalise the syndication process for opening letters of credit and standby letters of credit for rental power projects which have been approved by the Economic Co-ordination Committee (ECC) of the Cabinet. During the meeting, Pepco officials were unable to articulate their position and could not convince the banks about their requirements, sources added.

The banks also expressed reservations and concerns over the inability of Pepco to service the SBLCs, which are worth several hundred million dollars. Presidents and heads of corporate finance of leading banks and DFIs expressed annoyance over what Pepco presented in the meeting, and demanded more details of the projects before issuing SLBCs on behalf of the respective Gencos.

A meeting of banks will be held at NBP on Monday to finalise the matters. The meeting will include representatives from the Ministry of Water and Power and Ministry of Finance, as well as from Karkay Kardenz Holding of Turkey (which is setting up a 231 mw power plant in Karachi), Pakistan Power Resources (PPR) (which is setting up a 192 mw power plant in Multan), Walters Power International of the USA (which is setting up a 205 mw power plant in Karachi), and Techno-E-Power.

Pepco has been persuading the Ministry of Finance for quite some time seeking assistance in opening SBLCs for these fast track rental power projects. In some cases, the SBLCs that Pepco is contractually obligated to open are delayed by over one year leading some project sponsors to review their legal options. PPR had previously informed Pepco that delay in opening of SBLC for the Multan project would prevent the company from accessing "the original equipment earmarked for the project" that would result in "cost overruns and increase in tariff."

http://www.brecorder.com/index.php?id=902071