ISLAMABAD: The settlement of financial claims between the Abraaj Group and government entities appears to be complicating the transfer of K-Electric (KE) to Shanghai Electric Power (SEP) under a $1.77 billion deal.

At a meeting chaired by Finance Minister Ishaq Dar on Wednesday, KE representatives and senior of ficials from the ministries of finance, petroleum and water and power could not make any substantial progress to resolve their claims and counter-claims.

The KE delegation was led by Umar Lodhi, while the government side, led by Mr Dar, consisted of Water and Power Minister Khawaja Asif, Petroleum Minister Shahid Khagan Abbasi and PM`s Principal Secretary Fawad Hassan Fawad and the secretaries of the three ministries.

Mr Lodhi asked the government to address financial settlement issues, saying that in return, his company Abraaj would invest $150m in the health and banking sector.

Sources privy to the meeting told Dawn that the Ministry of Petroleum and Natural Resources demanded an upfront payment of Rs19bn from KE on account of principal bills of Rs14.5bn and Rs4.6bn under the Gas Infrastructure Development Cess (GIDC).

Petroleum Secretary Arshad Mirza told the meeting that his ministry or its entities could not forego the Rs45bn in mark-up that had piled up over the years, adding that the matter could only be resolved through the courts.

Oil and gas companies` total receivable claims against KE stand at about Rs68bn.

The federal government also told the KE delegation that it was not responsible for KE`s dues with the Karachi Water and Sewerage Board (KWSB), which would have to be settled at the provincial level.If that was not enough, claims and counter-claims between KE and the National Transmission and Dispatch Company (NTDC) as well as the ministries of finance and water and power appeared even more complicated.

The Ministry of Water and Power and its entities have total claims of around Rs138bn against KE. In return, KE has claims worth Rs52bn against the KWSB and Rs25bn or so against the ministries on account of subsidy claims and is expecting some net recoverable amounts from the government sector.

But since this may also require litigation or arbitration, Mr Dar as head of the special committee constituted by the prime minister set up a sub-committee of the secretaries of petroleum and water and power to have separate sessions with KE to resolve the matter of net payables and receivables.

An official told Dawn KE`s payables to NTDC on account of the 650MW supply from the national grid had been reconciled, but there was a major dispute over mark-up.

KE believed the mark-up should have been settled against subsidy claims, made and verified by KE and submitted to the finance ministry as part of uniform tariff policy of the government in a timely manner.

Therefore, if the finance ministry had been delaying subsidy payments, KE should not be penalise d and mark-up should not be charged to it. The Karachi-based utility also has claims of around Rs12.5bn due to delayed tariff notifications by Nepra.

The ministry of finance claimed this amount should be passed on to consumers, but laws and procedures did not allow past settlements with retrospective effect, as reported by Nepra. On top of that, another Rs10bn subsidy payment to KE was reportedly blocl(ed due to an audit ordered by the prime minister in the matter of the settlement of Rs480bn circular debt in 2013.