Under clause 6.7 (b) of the Fuel Supply Agreement (FSA) of 1992, the Company supplied 128,000 metric tons of furnace oil as “First Fill” at no charge to HUBCO in 1996. The stocks supplied were duly acknowledged by HUBCO through their certificate Ref. No. 1182.GJB and 1262 GJB dated November 25, 1996 and December 19, 1996 respectively. WAPDA through a letter dated August 5, 1992 jointly signed by WAPDA and the Company undertook to pay the cost of First Fill to the Company. However, subsequently WAPDA, through its letter No. GM/WPPO/CE-1/14624-26 dated December 5, 2001 refused to pay the amount on the contention that the project was first conceived on Build, Operate and Transfer (BOT) basis but later converted to Build, Operate and Own (BOO) basis under the Power Purchase Agreement (PPA) between WAPDA and HUBCO and therefore ownership of the project including fuel inventory at the end of PPA terms now remained with HUBCO, and WAPDA was not liable for First Fill to the Company. As against the WAPDA’s contention, the Company is of the view that the cost of First Fill is to be paid by WAPDA as per the letter referred above jointly signed by both the parties. MoP & NR through its letter dated November 17, 2003 advised the Company that the amount due from WAPDA will now be paid by the Ministry of Finance (MoF) as decided by Economic Coordination Committee (EEC) within two years. The Company is following up the matter with the MoF. The MoP & NR vide its office memorandum dated February 7, 2005 has advised the Finance Division to take necessary action in order to implement the aforesaid decision of ECC. In view of the decision of the ECC, the Company considers that the balance will be recovered in due course of time.

In 1996, through a decision taken at a meeting of the Privatisation Commission, and Finance Division, (GoP) the Company was advised to supply LSFO to Kot Addu Power Project at the HSFO price and WAPDA was advised to absorb the price differential between the two products. In accordance with the decision of ECC dated November 4, 2003, the Company was allowed to recover this amount through a pricing mechanism after recovery of the amount outstanding against its claims for Import Price Differential referred in note 14.1, the notification for which expired on December 31, 2004. Although no recovery has been made on this account, the Company continues to follow up the matter with MoP & NR. Last year, the Company submitted an independent report on the verification of the above claim to MoP & NR, upon their request. During the previous year a joint reconciliation exercise was carried out with WAPDA as per the decision taken in a meeting held on May 19, 2006 under the Chairmanship of Additional Finance Secretary (GoP). As a result of this joint exercise the claim has been reduced by Rs. 42,671 thousand, and the final reconciliation statements have been submitted to MoF and WAPDA, and which are under review. In view of the above, the Company considers that the above amount will be recovered in full in due course of time.