Privatization of the NPPMCL: alignment of the debt structure through debt financing of banks: Minister
KARACHI: Federal Minister of Privatization Mohammed mian Soomro said that the federal government is in the process of privatizing National Power Parks Management Company Limited (NPPMCL) which owned two power plants of Haveli Bahdur Shah Power Plant (1230 MW) in the district of Jhang and Balloki Power Plant (1223 MW) in Kasur district.
He expressed this view as he chaired a meeting on Friday with heads of local commercial banks at the State Bank of Pakistan to refinance the debt of the National Power Parks Management Company Limited (NPPMCL).
The Federal Secretary of the Ministry of Privatization, senior officials of Privatization and State Bank of Pakistan, representatives of the Ministry of Finance attended the meeting.
Both power plants were set up with GoP funding or equity instead of the 70:30 benchmark debt-to-equity ratio as allowed by the NEPRA tariff for NPPMCL power plants. , did he declare.
It was decided to align the capital structure according to the permitted tariff through long-term debt financing from banks, the minister said.
Soomro said the privatization of NPPMCL is an important transaction, ordering the Privatization Commission to coordinate with all stakeholders to accomplish the national cause.
On the occasion, the Director General of the Ministry of Privatization, Muhammad Jameel, said the purpose of the meeting was to discuss debt recapitalization and refinancing or replacement of excess GoP equity and the loan. PDFL through a commercial loan from NPPMCL.
Once the debt of these two plants was settled, they would be privatized, he said.
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A full performance of the issue was presented by the Ministry of Privatization and an in-depth discussion was held on the terms and conditions of the refinancing process.
Outlining the borrowing conditions, another official from the Ministry of Privatization said that all commercial banks and financial institutions regulated by the State Bank of Pakistan are eligible to submit their bids. The loan amount is 113 billion rupees. The tenure would be seven years and the capital would be repayable on a quarterly basis in accordance with NEPRA guidelines.
In addition, profits on debt or interest would be payable on a quarterly basis in accordance with NEPRA guidelines. In addition, the guarantee or security would be in accordance with the terms of power purchase agreements and power project implementation agreements, it was said at the meeting.
In addition, the maximum ceiling of the fixed spread is 1.8 pa. The NPPMCL can draw the loan at any time in one or more times.
The meeting was informed that the repayment dates for the mark-up and the principal 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 withdrawal of funds would be made.
Apart from this, the criteria for awarding bids and transactions is that the loan should be obtained from the bidder offering the lowest (fixed) spread over the six-month KIBOR in accordance with NEPRA guidelines. The price levels quoted by the bidders must be global and no additional fees / costs / expenses will be paid by NPPMCL in any case, the meeting has been informed.
Selection criteria including offers above the maximum ceiling of K + 1.8% not to be considered. Individual bids and multiple bids would be permitted. The minimum auction size should be Rs 1 billion and the bids in the multiple should be Rs 1 billion. NPPML will determine the cutoff gap and the cutoff gap would be offered to all successful bidders. The remaining bids will be rejected, the assembly has been informed.
There have been various suggestions from the banking side to move towards debt refinancing. The Director General of Debt at the Ministry of Finance was of the opinion that all banks should submit their offers individually.
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All qualified bidders will enter into a consortium agreement and the bank or DFI offering the highest loan amount will lead the consortium.
However, the President of the National Bank of Pakistan (NBP) and HBL offered to receive a tender from the consortium. After discussion, it was agreed that the banks’ suggestions will be taken into account in the preparation of the RFP (Request for Proposal).
The meeting suggested that the consortium would be formed by banks and that the refinancing should be done competitively as as many banks as possible could participate.