[vc_row][vc_column][vc_column_text dp_text_size=”size-4″]Hub Power Company (Hubco) is deeply concerned about its inability to obtain foreign exchange for critical spare parts, which falls under Pakistan Political Event and Force Majeure under Article 13 of the Power Purchase Agreement (PPA).
It states that any resulting losses due to a lack of spare parts will be borne by the government of Pakistan.
Hubco’s chief financial officer (CFO) drew Managing Director PPIB’s attention in a letter to the Company’s severe challenges in importing spare parts for its plant, which prevents it from performing timely maintenance to ensure capacity. According to Business Recorder, the difficulties in importing are directly related to the country’s limited availability of foreign exchange.
Given the country’s reliance on power generation, energy imports were ranked second on the central bank’s priority list. However, because the regulator’s definition of energy imports excludes spare parts for power plants, banks are refusing to issue Letters of Credit (LCs) or make payments for the import of spare parts.
“Accordingly, these circumstances fall within the terms of Pakistan Political Event under clause 13 of IA, and trigger an Exceptional Event,” the letter stated. Likewise, they constitute Force Majeure under Article 15 of the PPA.”
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According to CFO Hubco, timely maintenance and the availability of required spare parts are equally important for generating power from such fuel. “We reiterate that the inability to import spare parts is directly attributable to the restricted availability of foreign exchange in the country. Under Clause 10 of the Implementation Agreement (IA) of October 27, 2008, between Pakistan and Hub Power Company Limited, the Government of Pakistan (GoP) is required to ensure the availability of foreign exchange required for the foreign currency expenses, inter alia, purchase of spares,” he said in the letter.
Hubco has requested that PPIB’s Managing Director intervene immediately to ensure adequate foreign exchange availability and to remove obstacles to the import of spare parts and other foreign currency payments. For the time being, it is prudent to update the Circular’s priority list to include power plant parts in the description of energy imports.
According to the power company, it reserves its rights under the concession documents and other regulations, including but not limited to the PPA and Implementation Agreement (IA), for losses incurred due to foreign exchange shortages.[/vc_column_text][/vc_column][/vc_row]
