ISLAMABAD  - Nine Independent Power Producers (IPPs) have reportedly warned that international credit agencies will substantially downgrade Pakistan's ratings if the government does not pay their dues before May 4.

The nine IPPs are Atlas Power, Liberty Power Tech, Nishat Chunian, Nishat Power, Orient Power, Sapphire Electric Company, Halmore Power, Rosch Power and Saif Power Limited, according to a private television news channel.

"Demand notice issued to the government by the 8 IPPs is maturing on May 4, 2012. If the government does not pay the IPPs before this date, government will default on its sovereign guarantee which is considered a significant event for the economics of any country," said one of power sector analysts. Generally, whenever such an event occurred, international credit rating agencies substantially downgraded the credit rating of that country and most of the institutions and agencies refrain from giving more loans to the government and the economic and financial image of the state was shattered in the outside world, he added.

The demand notice says: "The amount specified in the notice is due and payable by the power purchaser (NTDC) under the power purchase agreement between the company and the power purchaser. Demand in writing for payment from the power purchaser was delivered to the power purchaser on or after the date payment was due. Notice of such non-payment was delivered to the guarantor not less than 30 days prior to the date thereof; and such amount, on the date hereof, remains unpaid by the power purchaser."

A power sector analyst told that IPPs were facing a very odd situation. The ministry of water and power had repeatedly shifted responsibility for clearing dues on the finance ministry, saying that if the latter cooperates with the power sector, the situation would be different in terms of IPP issues as well as power shortages.

Senior officials of water and power ministry visit finance ministry every day to seek funds to pay the companies, but the former is doing nothing, officials said. "If we seek Rs20 billion from the finance ministry, they pay only Rs5 billion. We again ask for the remaining Rs15 billion," said the officials of the water and power ministry.

"The government, is, apparently not taking the issue seriously and appears to be living in a somewhat closed-door situation, oblivious of what is happening around it," said one of the CEO's of the IPPs.

Criticising the Private Power Infrastructure Board (PPIB) for not pursuing the IPPs' case, which had already been deprived of gas, he said that the government's actions might cause the collapse of the power generating industry, which would also take the banking industry in its stride.

These IPPs have already defaulted on debt repayment to banks due on March 31 this year and their operational capacity had massively been hit by non-availability of credit to purchase fuel to run plants.

However, the spokesman for the water and power ministry was not available for comments.