THE second half of fiscal year 2014 proved to be another difficult period for independent power producers, as the National Transmission and Despatch Company again failed to make timely payments.
The Rs480bn circular debt transaction was not followed by any major structural changes, allowing the circular debt to resurface again. Despite the approximately 30pc power tariff hike, distribution companies (discos) continue to default on their payments to power producers, as recoveries declined from 87pc to 75pc.
Moreover, transmission and distribution losses for discos averaged at 17.55pc, well above 12.82pc losses allowed by the National Electric Power Regulatory Authority (Nepra). Rapid increase in circular debt during FY14 was partly due to the expensive generation mix, as the contribution of furnace oil-based generation rose to 36pc in the first nine months of FY14 (9MFY14), against 33pc recorded during the same period last year.
As a result, receivables for Hubco, Kapco, Nishat Chunian Ltd (NCL) and Nishat Chunian Power Ltd (NCPL) rose to Rs164bn during 9MFY14, close to the levels witnessed before the Rs480bn liquidity injection in June 2013. Worsening liquidity threatens to choke the energy chain once again.
