ISLAMABAD - The Economic Coordination Committee (ECC) of the cabinet on Tuesday approved issuance of sovereign guarantee worth of Rs192.95 billion for power sector to pay existing loans as power distribution companies (Discos) have expressed their inability to pay loans due to financial constraints.

The ECC meeting, which was chaired by Finance Minister Ishaq Dar, has approved issuance of sovereign guarantees by the Ministry of Finance in respect of Fresh Syndicated Term Finance Facilities for four projects of Rs30.95 billion, Rs40 billion, Rs25 billion and Rs15 billion for Power Holding (Private) Limited to set off/adjust existing facilities. The ECC also approved another proposal to extend Tenor and Grace Period in respect of Term Finance Facility of Rs82 billion for Power Holding (Private) Limited.

Sources informed The Nation that the Ministry of Water and Power has asked the ECC to raise the amount through banks, as Discos have expressed their inability to pay loans due to financial constraints. The ministry in its summary stated that power sector has shown marked improvement in its performance in the past two years. The recoveries had improved to 93 percent in last year 2016 from 89 percent. Similarly, the line losses had come down to 17.8 percent from 19 percent of 2015.

The Discos/power sector will have to arrange funds through borrowings from local commercial banks in order to discharge their liability towards syndicate on account of principal instalments in respect of Rs30.95 billion syndicated term finance facility.

The Ministry of Finance will provide government guarantee for the repayment of loan as well as interest for the fresh facilities. In all four cases, the principal instalment payments shall be deferred for a further period of two years from the date of execution of the fresh facilities.

The ECC also approved a proposal of the Ministry of Water and Power, regarding an existing Term Finance Facility for Power Holding (Private) Limited, to restructure the facility by extending the tenor of the facility from seven years to 10 years, including extension in grace period from three years to six years.

The ECC, after considering and deliberating upon another proposal of the Ministry of Water and Power, approved the Standard Implementation Agreement (IA) for transmission line projects under Policy Framework for Private Sector Transmission Line Projects, 2015. As per the same proposal, the ECC also approved the TSA for HVDC Transmission Project.