Accountancy Forum

<b>PSO's SOS to Petroleum Ministry worst-ever fuel, power crisis feared after July 22 </b>


ISLAMABAD (July 16 2009) The country may face severe fuel and power crisis after July 22 as Pakistan State Oil (PSO) has shown its inability to keep oil supply intact if the government does not immediately release Rs 30 billion to clear the outstanding dues of oil refineries and international suppliers.

Sources in Petroleum Ministry revealed to the Business Recorder that they received SOS letter from PSO Managing Director on Wednesday, a copy of which has been sent to the Finance Ministry, requesting Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain to intervene for immediate release of Rs 30 billion.

The PSO Managing Director, in his letter, said that PSO's total outstanding against different clients had accumulated to Rs 79 billion and the power sector was major defaulter.

The PSO was to pay Rs 21 billion to international fuel suppliers within this fortnight, the sources said, adding that if the PSO failed in clearing the backlog, its credibility would be affected resulting in problems for import of oil in future.

The sources quoted the PSO Managing Director as saying in his SOS letter that due to failure of the PSO's clients, especially power sector, to pay in time, it was depending on the borrowing from the banks to run its operations, which had also piled up to Rs 20 billion.

The SOS letter further said that the PSO's letter of credits (LCs) might also default if the government did not release Rs 30 billion to pay to the international fuel suppliers and oil refineries without wasting more time.

The sources said that the PSO was defaulter of oil refineries and the amount had accumulated to Rs 52 billion. "Non-payment of dues by the PSO to oil refineries is also affecting the operation of oil refineries. The PSO is the major fuel supplier in the country that captures over 70 percent market share and it is making uninterrupted fuel supply despite constantly rising payments to different clients," said the sources.

The sources feared that country was already undergoing power shortage and if the PSO supply was interrupted due to its poor financial health, the whole country would be facing worst ever power crisis that would also badly hit the manufacturing sector.

<i><b>Copyright Business Recorder, 2009</b></i>
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<b>Massive power shortage looms as IPPs threaten to stop supply </b>

KARACHI (July 18 2009) The city is likely to face a massive power shortage of over 250MW, as the Independent Power Producers (IPPs) have threatened to stop supply to Karachi Electric Supply Company (KESC), which is yet to pay their outstanding dues of over seven billion rupees.

The IPPs had not been paid the dues by KESC for the period October 2008 to July 2009, sources told Business Recorder on Friday. Gul Ahmed and Tapal, the two IPPs, have been supplying over 250 MW to the company since 1997. According to the sources, the IPPs were giving the warning of disconnection of power to KESC, following a threat they received from the oil companies. The oil companies have also threatened the IPPs of stopping the supply, if the outstanding dues are not cleared immediately, the sources added.

They said due to non-payment of the dues by KESC, the private power producers were also unable to pay outstanding to the oil companies. The sources also claimed that after the expiry of 10-year agreement with these IPPs, the company would also not want to get the full supply of electricity from these power producers.

According to the agreement between the IPPs and KESC, the company had to purchase electricity on fixed rates without any reduction in the supply for 10 years. Another source said Gul Ahmed has already stopped supply to KESC since 6pm on July 16. In a letter (F-GOP-L09-00027), sent to President Asif Ali Zardari, on July 15, 2009, Gul Ahmed has stated that as a result of persistent and continuing defaults by KESC it could not continue supply.

It said as a result of no less than 29 separate failures and defaults by KESC under the Power Purchase Agreement (PPA), Gul Ahmed is currently owed a sum of Rs 3.03 billion for the period October 2008 to July 2009. "At present furnace oil prices and the private power producer need Rs 30 million per day to keep the plant operational," it said.

In the letter, the IPP also said that since 1997, it has been continuously supplying power to KESC as per the company's demand and without fail, and has met all contractual obligations under the PPA. However, in a news briefing, Jan Abbas Zaidi, the Chief Operating Officer for Distribution, KESC confirmed that the supply has been disconnected by Gul Ahmed while Tapal was supplying the electricity continuously.

He said that KESC has also not received its receivables of at least Rs 36 billion from different government, semi-government and general consumers. According to official sources, though the company was trying to enhance its power generation capacity, the agreement with these IPPs was intact.

<i><b>Copyright Business Recorder, 2009</b></i>
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