Two power plants: PD shares with PC issues hindering sell-off process

ISLAMABAD: The Power Division has reportedly shared issues with Privatisation Commission (PC) that are hindering process of privatisation of Nandipur Power Plant (NPP) and Guddu Power Plant (GPP), well-informed sources told Business Recorder.

Sharing the details, sources said, last month Ministry of Privatisation briefed the Cabinet Committee on Privatisation (CCoP) that PC Board, in its meeting held on August 26, 2019, approved ten Public Sector Entities (PSEs), including the Nandipur Power Plant and Guddu Power Plant, for inclusion in Active Privatisation List and directed to initiate the process for publishing of Expression of Interest (EoI) for hiring of FA, on case to case basis.

Expression of Interest for hiring of Financial Adviser (FA) for privatisation of NPP and GPP were separately advertised on August 29, 2019. PC Board, in its meeting held on December 27, 2019, approved appointment of Consortium of United Bank Limited (UBL), EY Ford Rhodes (EY), Haider Mota & Co.

Govt moves NPP, GPP sell-off process forward

NESPAK as FA for privatisation of 425-525 MW Nandipur Power Plant. Financial Advisory Services Agreement (FASA) was signed on February 19, 2020 with Consortium of M/s UBL and M/s EY for the initial period of eighteen months (from February 19, 2020 to August 18, 2021).

It was further stated that the process of hiring of FA for Guddu Power Plant (GPP) did not materialize due to lack of interest shown by the local and foreign banks and financial institutions. The Due Diligence Reports, submitted by FA in December, 2020, highlighted key issues in NPP’s proposed transaction which were as follows: (i) removal of charge, created on assets of the Power Plants, for Sukuk Bond issued by GoP; (ii) separate corporate entities to be established each for GPP & NPP, carving out from CPGCL (GENCO-II) and NPGCL (GENCO-III) respectively; (iii) separate Power Purchase Agreements (PPAs) to be entered into, for GPP and NPP, with CPPA-G; (iv) Implementation Agreement (IA) or GoP guarantee, similar to GoP’s with IPPS, for both GPP and NPP; (v) Separate gas allocation, specific for these power plants; (vi) separate GSPA (post gas allocation); (vii) creation of separate gas headers; (viii) separate power generation license to be applied to NEPRA, carving out from consolidated license of NPGCL and CPGCL; and (ix) transfer of land and assets in the name of new NPP and GPP Companies.

Ministry of Privatisation noted the following directions/decisions of the Federal Cabinet and its committees, which are in field, but have not been complied, by various Ministries/Divisions, till date thereby impeding the privatisation process for NPP and GPP: (i) Federal Cabinet’s decision dated 20th August, 2019;(ii) Federal Cabinet’s decision of January 11, 2022; (iii) CCoP’s decision dated 25th February, 2020; (iv) CCoP’s decision of August 21, 2020; (v) CCoP’s decision of March 18, 2021; and (vi) CCoP’s decision of December 31, 2021.

The Ministry stated that multiple directions from multiple fora have been passed since 2018 for the privatisation of the NPP and GPP, for resolution of key issues related to the transaction(s) to various Ministries/Divisions. In addition, a separate proposal for partial settlement of PSO’s circular debt through acquiring controlling stake in power plants was also deliberated at various fora, which will not be possible as long as these power plants remain on the Active Privatisation List/Programme.

No progress on the directions of Cabinet and its committees have been made despite a lapse of five years. The agreement with FA, hired for NPP, has long expired and there seems to be no justification in re-hiring of FA as long as the identified issues, related to the privatisation transactions remain unresolved.

The Ministry maintained that it has, from time to time, reminded the concerned Ministries/Divisions and apprised the relevant fora, including Cabinet and its committees, but no progress has been made.

These power plants continue to be on the active privatisation list with pending highlighted issues which remain unresolved thus making it impossible for the Division to carry further the privatization process.

Ministry for Privatisation submitted the following proposals for consideration and approval of the CCoP: (i) Nandipur and Guddu Power Plants, placed on the privatisation programme, vide Cabinet’s decision dated 31st October, 2018 may be delisted; (ii) Ministry of Energy (Power Division), being the concerned Ministry/Division may consider viable options for the entity in consultation with relevant stakeholders including PSO’s proposal for partial settlement of PSO’s circular debt through acquiring controlling stake in power plants being not covered under the Privatisation Commission Ordinance, 2000; and (iii) in future, Nandipur and Guddu Power Plants would not be placed on the Active Privatisation Programme/List till the above identified issues, related to its privatisation under the Privatisation Commission Ordinance, 2000,are resolved by the concerned Ministries/Divisions, including Finance, Power and Petroleum Divisions.

During the ensuing discussion, Power Division submitted that most of the issues have been resolved while the Ministry of Privatisation reiterated that the above proposals may be approved as the issues related to both these plants and as indicated in the summary, remain unresolved thus necessitating the need to delist both these power plants.

However, it was argued that Power Division may like to present the updated position to the CCoP, and time was required for resolution of each of the issues. After detailed discussion, Power Division was directed to submit the timelines for each of the issues, hindering the process of privatisation to the Privatisation Division which would be placed subsequently in front of the CCoP in its next meeting for its consideration and decision.

The sources said Power Division has shared its viewpoint on the issues which are hindering the process of privatisation of both power plants, which will now be taken up by the new CCoP, which is yet to be notified.