ISLAMABAD: With energy sector in serious liquidity crisis, the power companies are threatening to invoke sovereign guarantees provided on behalf of public sector companies, posing a serious threat to the country`s image, a senior water and power ministry official said.
The official said the power ministry had conveyed the situation to the ministry of finance and the prime minister because they had to take remedial measures.
The official shared with Dawn a summary sent to the economic coordination committee of the cabinet which said “because of the previous year`s subsidy overhang and non-payment by provinces and KESC, Pepco has not been able to fulfil contractual commitments to suppliers”.
“As a result, IPPs (independent power producers) have started to serve notices of intent to invoke sovereign guarantees, PSO has intimated that fuel supplies would be curtailed and gas companies have started serving intent of disconnection notices,” said the summary seeking funds to ease financial pressures.
Confirming that the country was facing `substantial unscheduled loadshedding`, the power companies and the power ministry have started building up a case for alleged fuel supply contract violations by Pakistan State Oil and have asked the ministry of petroleum and natural resources for intervention to resolve the problem.
The power ministry and power companies have accused the state-run oil supplier of failing to meet contracted fuel quantities and for supplying fuel with `high water content and impurities`, resulting in damage to generation machines and higher loadshedding.
“This non-supply of fuel oil despite commitments and upfront payments is leading to substantial unscheduled loadshedding with extremely negative consequences,” Water and Power Secretary Javed Iqbal wrote last week to Secretary of Petroleum and Natural Resources Imtiaz Kazi.
“Furthermore, the quality of oil being supplied to Kapco and Pakgen is a cause of grave concern and has further complicated the situation,” he said.
Mr Iqbal said the PSO`s average delivery of fuel to power sector companies had averaged 14,300 tons per day against a requirement of 31,000 tons and PSO`s firm commitment of 23,000 tons per day.
In their separate letters to the federal government, Pakistan Electric Power Company which acts as an umbrella of over 13 distribution, generation and transmission companies in the public sector, Kot Addu Thermal Power Company and Lalpir Power, said that despite release of Rs45 billion required funds “PSO has not been able to ensure an un-interrupted fuel supply of 23,000 tons per day”.
“Presently, the hydel power generation in the country has reduced substantially due to the canal closure, which is likely to continue till the end of this month. Therefore, the supply of un-interrupted fuel to power companies is very crucial,” said Pepco Managing Director Rasul Khan Masud.
In two different letters, Kapco accused PSO of providing “oil with high moisture contents and other impurities, increasing due to poor quality of steam and shifting of filthy water from trenches and effluent water tanks without proper settlement and treatment”.
For example, Kapco said, the fuel supplied by PSO contained high concentration of sodium, calcium and magnesium etc which created problems and financial losses to Kapco.
The company claimed that PSO fuel contained sodium concentration of 88 ppm (particles per million) against approved specification of 50 ppm while moisture content was as high as 4 per cent against approved maximum limit of 0.3 per cent.
Lalpir Power — a subsidiary of Nishat Group — said that PSO was not providing full fuel supplies because of its inability to make payment to Parco Refinery. The company gets a monthly supply of about 100,000 tons from PSO under a long-term fuel supply agreement.
“The PSO would be in default under FSA due to their inability to supply fuel. At present, PSO is unable to meet our demand and we will not be able to start our Pakgen facility which is due to be started on Friday”.
Lalpir Power said the company had met its payment obligations and had currently paid for 80,000 tons of fuel.
“The PSO is offering us fuel which is significantly below the FSA limits. The fuel offered by PSO through its own decanting facility is of 3-6 per cent moisture (FSA limit 0.3 per cent) and 16,017 calorific value (FSA limit 18,200)”, said the company.