ISLAMABAD: The government on Thursday approved issuing Rs120 billion worth of sovereign guarantees to local and international banks to meet financing requirements of five ‘signature power projects’ of almost 4,000MW capacity.

This also included over Rs37.65bn government guarantee to controversial 425MW Nandipur Power Project and almost Rs50bn guarantee (first phase) of two LNG based power projects of 2,200-2,400MW capacity in Punjab recently contracted to Chinese firms. Another Rs18bn guarantee was issued for Thar-Matyari transmission line to enable evacuation of 1,200MW power generation from Thar Coal to national grid.

The meeting, presided over by Finance Minister Ishaq Dar, also gave approvals to a few decisions announced for businesses and already under implementation.

The guarantee for Nandipur project had been issued to a syndicate of local banks including Habib Bank, National Bank, United Bank, Askari Bank, Bank Alfalah and Bank of Punjab against their financing for the project.

The original guarantees had already expired but delayed commercial operation of the plant had made it impossible to meet repayment schedule because its generation cost could not be billed to consumers. The rollover of guarantees will enable the syndicate to extend the period of financing facility until end-June 2016.

It also approved provision of sovereign guarantees worth Rs38.85bn to meet first phase (40pc) offshore financing requirement of $370 million contract cost of two LNG based power projects in Punjab and Rs9.5bn local funding requirement. The second phase of 45pc (engineering, procurement and construction cost) of over Rs55bn would be approved later.

The ECC also approved 15pc mobilisation advance (over Rs18bn) to contractors of LNG-based power plants at Haveli Bahadur Shah near Jhang and Balloki near Kasur.

The government guarantees would enable establishment of letters of credit for setting up of two 1,000-1,200MW generation capacity each for combined cycle power plants at Haveli Bahadar Shah, Dist Jhang and Balloki, Dist Kasur.

The ECC was informed that process had simultaneously been set in motion for allocating funds in the Public Sector Development Programme (PSDP) for next year so that more guarantees were not required.

The meeting also approved extension of GoP guarantees for Rs15bn term financing facility from the National Bank of Pakistan for Power Holding (Pvt) Ltd. The guaranteed facility has been in place for the last two years and its tenor has been extended for another two years.

Wheat for WFP: The meeting also approved provision of 64,000 tonnes of wheat to the United Nations World Food Programme for temporary displaced persons of Fata and KP. The said quantity costing Rs2.569bn will be distributed till December 2015.

Duty on yarn: The committee also approved introducing a 10pc regulatory duty on the import of cotton yarn and grey and processed fabrics of cotton on the recommendations of the federal board of chairman to meet a demand of the textile sector.

Published in Dawn, October 30th, 2015

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