Islamabad November 08, 2021: The senior representatives of JP Morgan Mr. Asif Raza- Managing Director, Global Corporate Bank CEEMEA along with Mr. Imran Zaidi- Managing Director, Global Corporate Bank MENA and Mr. Amin M. Khawaja, Chief Executive Officer, Pakistan called on Federal Minister for privatisation Mohammedmian Soomro, Senior officials of the Ministry also attended the meeting.
The JP Morgan is one the the world’s largest investment banks and advising the consortium of Qatar Investment Authority (QIA) which showed keen interest for the privatisation of NPPMCL.
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Federal Minister for Privatisation Mohammed Mian Soomro said that federal government was in the process of privatising National Power Parks Management Company Limited (NPPMCL) which owned two power plants of Haveli Bahdur Shah Power Plant (1230 MW) in District Jhang and Balloki Power Plant (1223 MW) in District Kasur.
Both the power plants were set up with GoP funding or equity instead of the 70:30 debt to equity ratio benchmark as allowed in NEPRA’s tariff for NPPMCL’s Power Plants, he told.
“It has been decided to align the capital structure as per allowed tariff through long-term debt financing from the banks,” the minister said.
Soomro said that privatisation of NPPMCL is a large transaction, directing that Privatisation Commission will coordinate with all stakeholders to fulfill the national cause.
The meeting was held in the backdrop of the privatisation of two RLNG Power plants of Haveli BahaderShah and Balloki. Government has initiated a process of implementing economic reforms in the power sector, as a part of the reform, Ministry of Privatisation is pursuing privatisation of state-owned entities to promote and enhance capital formation outside government budget and to improve efficiency through competition, accountability, managerial autonomy and profit incentives.
The MD (JPMorgan), expressed that their consortium Qatar Investment Authority (QIA) is a strong contender for investment for the said power plants. The representatives inquired about the current volume of circular debt, payment due to the IPPs and the huge receivables of NPPMCL, which could have strong bearing/ negative impact on the potential investment in the sector.
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Presenting the terms of borrowing, another official from Ministry of Privatisation told that all commercial banks and financial institutions regulated by SBP are eligible to submit their bids. The loan amount is up to Rs.113 billion. Tenure would be seven years and principal amount would be repayable on quarterly basis as per NEPRA guidelines.
Besides, Profit on debt or interest would be payable on quarterly basis as per NEPRA guidelines. In addition, Collateral or security would be as per the terms of Power Purchase Agreements and Implementation Agreements of the power projects, it was told in the meeting.
Moreover, 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 informed that the repayment dates of mark-up and principal will be 30th September, 31st December, 31st March and 30th June. The repayment would begin at the end of quarter in which 1st draw down of funds would be taken.
Aside from this, bidding and transaction award criteria is that the loan shall be obtained from the bidder offering the lowest (fixed) spread relative to six months KIBOR as per NEPRA guidelines. The pricing levels quoted by the bidders shall be all encompassing and no extra fee/cost / expense shall be paid by NPPMCL in any case, the meeting was briefed.
Selection criteria comprised of bids above maximum ceiling of K+1.8% not to be considered. Both individual bidding and multiple bids would be allowed. Minimum bid size should be Rs 1 billion and bids in the multiple should be of Rs 1 billion. NPPML will determine cut-off spread and cut-off spread would be offered to all successful bidders. The remaining bids shall be rejected, the meeting was informed.
There were different suggestions from the banking side for moving towards debt refinancing. Director-General Debt of Ministry of Finance was of the view that all banks should individually submit their bids.
All qualified bidders will enter into consortium agreement and Bank or DFI offering the highest amount of loan would lead the consortium.
However, the President of National Bank of Pakistan (NBP) and HBL proposed to receive an invitation of bids from consortium. After discussion it was agreed that suggestions of the banks will be considered in preparation of RFP (Request for Proposal).
The meeting was suggested that the consortium would be formed by banks and refinancing should be made through competitive method as the maximum banks could participate.
