OUR STAFF REPORTER KARACHI - The Independent Power Producers (IPPs) that have been established during last three years are doubly impacted by the huge circular debt in the power sector as in the absence of payments against their services they are finding it extremely difficult to continue with loan repayment schedules finalised with banks. Power sector experts said that it was perhaps the pressure of non-payment that forced four IPPs to invoke the sovereign guarantee given to them by the government of Pakistan for payment of their dues by PEPCO. The PEPCO owes a cumulative sum of Rs. 16.5 billion to these four newly established IPPs and they are worried because they exhausted all their resources to keep their power generation plants operational while their dues against PEPCO accumulated to Rs 3.5 to 4.5 billion each. They said that now these companies are in panic because the debt repayment of the long-term loans against which these plants were established is due for quarter ending March 2011. In fact these companies have almost exhausted the 90 days period up to June 30, 2011. The sponsors of the four power plants namely Liberty Power, Atlas Power, Nishat Power and Nishat Chunian are on the boards of numerous other corporate entities and if these power plants fail to service their loans by June 30 this year, they would fall under the category of defaulters and other companies in which sponsors of these power producers are serving as Board members may also come on the list of CIB i.e. default. Financial experts said that the defaults by these power producers due to non-payment by the government despite sovereign guarantee would have serious consequences for the sponsors and directors associated with these projects. They said that the power companies have played safe because after serving notice to the government of Pakistan on May 14, the government under its sovereign guarantee is bound to arrange payment in 30 days after the receipt of initial notice (30 days will end on June 13). In case of non-payment, the government will receive final notice to pay and it has to pay within 10 days after the receipt of final notice otherwise it would plunge into sovereign default, they added. In order to avoid sovereign default on minor payment of Rs 16.6 billion, the government would have to make the payment by June 23, they said. Financial experts deplored that the government by not making timely payment to the IPPs and despite providing sovereign guarantee to them, is scaring away potential investors. The average daily payment to IPPs does not even cover their daily fuel purchase requirement. This will have serious implications on any further private investment in the power sector too, they warned. They said that it is the time of severe power crisis in the country and there is a need of huge investment in this sector to curtail the crisis. They further said that the inability of the power purchaser (the government) to pay for the electricity supplied by the IPPs has forced the banks to stop financing for power projects.