LAHORE: The government is on the edge of sovereign default unless it pays by Friday (today) evening eight independent power producers (IPPs) their dues of Rs34 billion on account of electricity purchased from them in October and November last year.

“We would be forced to shut down our plants and stop producing electricity if the payment of our outstanding dues is not made by tomorrow evening,” the  CEO of one of the IPPs told Dawn on Thursday on condition of anonymity.

The eight IPPS that have invoked sovereign guarantee together produce 1,700 megawatts of electricity. “The closure of the plants and non-compliance of the contractual obligations by the government will also lead the IPPs to default on their quarterly payments on their bank loans,” he said.

In all, the government owes a sum of Rs59bn against electricity purchased from the eight IPPs since October last.

“The delay in payment of our dues will jeopardise our investment of Rs200 billion. We are no longer able to purchase fuel and pay back our project loans of $1.6 billion to the banks because of the government’s default on our dues,” a senior executive of another IPP said while talking to this reporter.

”It is simply not possible to run power plants without finance, but the government is not paying any heed to this issue that will worsen the power crisis in the country,” he said.

He said the government had called them for meetings in Islamabad a week ago to ask them to withdraw their notices instead of paying their dues.

He said the power producers would operate only if and when the government pays them their electricity price.

He said the IPPs — Saif Power, Liberty Tech, Nishat Power, Nishat Chunian Power, Oriental Power, Saphire Power, Halmore Power and Atlas Power — were forced to put the government on notice in accordance with their contracts because Pepco, the power purchaser, had failed to clear its dues within the agreed period for power supplied to it by them.

“As the government is the sovereign guarantor, the IPPs after exhausting all legal avenues, including serving notices to Pepco, invoked the guarantee,” he said.