- Finance Division authorized to arrange interest payable for GoB
- Agenda items approval paves way for early start of project
ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Sunday authorized Finance division to direct Government Holding Private limited (GHPL), OGDCL and PPL to deposit late payment interest amount of $22.7 million in escrow account jointly operated by Antofagasta PLC and government of Pakistan in connection with Reko Diq Project dispute settlement.
Sources said that the Ministry of Energy has asked the ECC to authorize the finance division to direct GHPL (for its own as well as GoB’s share), OGDCL and PPL to deposit the aggregate amount of interest amounting to $22.7 million in the escrow account. This represents the interest payable of $16.8 million at US prime rate plus 2% from October 1, 2022 to December 15, 2022 and the interest earned from March 31, 2022 to September 30, 2022 amounting to $5.8 million.
The interest payable is based on prevailing US Prime rate, however, the actual deposit will be based on the updated calculations due to any change in interest rates to be informed by the financial advisors of SOEs and GoP if required.
Presently, The SOEs including OGDCL have to pay $4.7 million interest, PPL $4.7 million, GHPL $4.7 million while the government of Balochistan share in interest payment is $8.5 million.
Federal Finance Minister Senator Mohammad Ishaq Dar chaired a meeting of the ECC and approved two important agenda items related to Reko Diq Project thus paving the way for early start of the Reko Diq project. pic.twitter.com/TUiCBCT8Rn
— Ministry of Finance (@FinMinistryPak) December 11, 2022
The Energy division has also asked ECC to authorize the finance division to arrange the interest payable for GoBs share amounting to $8.5 million from the loan of Rs65 billion already raised by the GHPL with GoP guarantee.
Meanwhile, it also requested ECC to direct and authorize the concerned division of GoP and the SORS to act in such a manner to ensure that the deposited amount ($900) alongside any interest in US dollar without exception to the SOEs should the Reko Diq Project fail to commence. In the event that the Reko Diq Project meterializes, direct and authorize the concerned divisions of GoP and the SOEs to act in such a manner to ensure that the deposited amount along with interest deposited by the SOEs in the escrow account to form part of the consideration for share purchase of Reko Diq Mining company limited such that its shares are transferred to Pakistan Minerals private limited.
It is pertinent to mention here that the government of Pakistan and provincial government of Balochistan have entered into an out of court dispute settlement with Ms Tethyan Copper Company limited Australia (jointly owned by Barrick Gold Corporation of Canada and Ms Antofagasta PLC of Chile) in respect of Reko Diq Copper Gold Project, Chagai District (Balochistan) after the adverse arbitral awards of the international center for settlement of investment disputes and expected similar award from international chamber of commerce against the federation and Balochistan province.
These arrangements include development of the aforesaid resources under a constituted Reko Diq Project by a joint venture comprising 50% Barrick Gold Corporation, 25% GoB and 25% GoP.
The clause 2.1 (a) of the Antofagasta Exit Deed signed March 20, 2022 that the GoP shall deposit $900 in the escrow account and clause 2.1(c) provides that in case the final settlement occurs between June 30 and December 15, 2022, the GoP shall pay a late payment interest of US Prime Rate plus two percentage points compounded on ,monthly basis.
Meanwhile, the deed clause 3.2 provides that the amount in Escrow ‘together with all interest earned on the credit balance in the escrow account since it was opened’ is to be paid to Antofagasta.
As per the Finance ministry handout, ECC allowed Finance Division to direct GHPL (for its own as well as GoB’s share), OGDCL and PPL to deposit the aggregate amount of interest to the sum of US$ 22,718,173/- in the escrow account from March 31, 2022 to December 15, 2022.
The ECC further allowed the Finance Division to arrange the interest payable for GoB’s share amounting to US$ 8,519,314 /- from the loan of Rs65 billion already raised by the GHPL with the GoP guarantee.
Further, the ECC allowed the concerned Divisions of GoP and the SOEs to act in such a manner to ensure that the deposited amount along with interest deposited by the SOEs in the escrow account to form part of the consideration for share purchase of Reko Diq Mining Company Limited.
The ECC also considered and approved a proposal of the Finance Division through a summary on the funding plan of the Government of Pakistan for the share of the Government of Balochistan in the Reko Diq Project.
As per proposal, overall funding commitment of US$ 717 million over the period of 6 years by GoP in respect of GoB SPV Project Capital Commitment to be provided by the Government of Pakistan.
