NPPMCL debt structure to be aligned through bank financing: minister

KARACHI: The federal government is in the process of privatising the National Power Parks Management Company Limited (NPPMCL), which owned two power plants of Haveli Bahdur Shah Power Plant (1,230MW) in Jhang district and Balloki Power Plant (1,223MW) in Kasur district.

Federal Minister for Privatisation Mohammedmian Soomro expressed these views, while chairing a meeting held with the heads of local commercial banks at State Bank of Pakistan for debt refinancing of the National Power Parks Management Company Limited.

Both the power plants, were set up with the government funding or equity instead of the 70:30 debt-to-equity ratio benchmark, as allowed in the National Electric Power Regulatory Authority’s (Nepra) tariff for NPPMCL’s power plants, he said,

It has been decided to align the capital structure as per the allowed tariff through long-term debt financing from the banks, the minister said, adding that the privatisation of NPPMCL is a large transaction, directing that the Privatisation Commission will coordinate with all the stakeholders to fulfill the national cause.

Privatisation Ministry director general Muhammad Jameel said that the aim of the meeting was to discuss debt recapitalisation and refinancing or replacement of government of Pakistan’s excess equity and PDFL loan through commercial borrowing of NPPMCL.

Once the debt portion of these two power plants was settled, they would be privatised, he said.

A comprehensive representation of issue was presented by the Ministry of Privatisation and a thorough discussion was made on the terms and conditions of the refinancing process.

Presenting the terms of borrowing, another official from the ministry said all commercial banks and financial institutions regulated by the State Bank of Pakistan are eligible to submit their bids.

The loan amount is up to Rs113 billion. The tenure would be seven years and the principal amount would be repayable on a quarterly basis as per the Nepra guidelines.

Besides, the profit on debt or interest would be payable on a quarterly basis as per the Nepra guidelines. In addition, the collateral or security would be as per the terms of the power purchase agreements and implementation agreements of the power projects, the meeting was informed.

Moreover, the maximum ceiling on fixed spread is 1.8 p.a. NPPMCL may draw down the loan at any time in one or more installments.

The meeting was also informed that the repayment dates of markup and principal amount will be September 30, December 31, March 31 and June 30. The repayment would begin at the end of the quarter in which the first drawdown of funds would be taken.

Besides, bidding and transaction award criteria is that the loan would be obtained from the bidder offering the lowest (fixed) spread relative to six months Kibor as per the Nepra guidelines.

The pricing levels quoted by the bidders would be all encompassing and no extra fee/cost/expense would be paid by NPPMCL in any case, the meeting was briefed.

The selection criteria consists of bids above the maximum ceiling of K+1.8 per cent not to be considered. Both individual bidding and multiple bids would be allowed.

The minimum bid size should be Rs1 billion and the bids in the multiple should be of Rs1 billion. NPPML will determine the cutoff spread and it would be offered to all successful bidders. The remaining bids would be rejected.

There were different suggestions from the banking side for moving towards debt refinancing. The director general debt of the Ministry of Finance, said that all banks should individually submit their bids.

All qualified bidders will enter into consortium agreement and the bank or DFI offering the highest amount of loan would lead the consortium.

However, the presidents of the National Bank of Pakistan (NBP) and Habib Bank Limited (HBL) proposed to receive an invitation of bids from the consortium.

After discussion it was agreed that the suggestions of the banks will be considered in the preparation of Request for Proposal.

The meeting was suggested that the consortium would be formed by the banks and refinancing should be made through a competitive method as the maximum banks could participate.